- EUR/USD grinds higher towards the four-month-old resistance line, keeping the first weekly gain in four.
- US dollar remains pressured amid market’s indecision, downbeat US data.
- Geopolitical and recession woes challenge the upside momentum ahead of the key data, central bankers’ speeches.
EUR/USD extends the weekly recovery towards 1.0600, picking up bids to 1.0570 during Monday’s initial Asian session. In doing so, the major currency pair cheers US dollar pullback, as well as sluggish market sentiment, ahead of the key data/events.
US Dollar Index (DXY) posted the first weekly loss in four by the end of Friday’s trading, down 0.10% around 104.00 by the press time. The greenback gauge’s latest weakness could be linked to the downbeat inflation expectations and softer US data, as well as fears of the US GDP weakness.
That said, International Monetary Fund (IMF) Managing Director Kristalina Georgieva crossed wires during the weekend while saying, “Further negative shocks would inevitably make US economic situation ‘more difficult’.” It’s worth noting that the IMF revised down US 2022 GDP forecasts to 2.9% versus the 3.7% predicted earlier.
On Friday, the US New Home Sales for May, by 10.7% versus April’s revised figures of -12.0%, joined the record low print of the final reading of the University of Michigan's Consumer Sentiment Index for June, to 50.0 from 50.2 initial estimates, also drowned the US dollar. Elsewhere, a sharp drop in the German IFO Business Climate Index, to 92.3 in June versus last month's 93.0 and the consensus estimates of 92.9, join comments from the European Central Bank (ECB) official to weigh on the EUR/USD prices. ECB Vice President Luis de Guindos said on Friday that it was possible to see negative growth in the euro area in 2023, as reported by Reuters.
Reuters came out with the news suggesting that the Bank for International Settlements (BIS) calls for interest rates to be raised "quickly and decisively" to prevent the surge in inflation from turning into something even more problematic. The news also challenges the EUR/USD buyers of late.
Against this backdrop, S&P 500 Futures fail to track Wall Street’s gains, down 0.40% intraday at the latest, whereas the US 10-year Treasury yields dribble around 3.13% after posting the first weekly loss in four.
Moving on, the Eurozone calendar appears to be light ahead of ECB President Christine Lagarde’s speech. However, the US Durable Goods Orders for May, expected 0.1% versus 0.5% prior, as well as the Pending Home Sales, expected -2.0% versus -3.9% prior, will be important for daily directions. Above all, Wednesday’s debate of the US and the UK and the European central bankers at the ECB Forum on Central Banking will be important to watch.
Technical analysis
A convergence of the 21-DMA and the 50-DMA, around 1.0600 by the press time, restricts the short-term recovery of the EUR/USD pair ahead of a downward sloping resistance line from February 10, near 1.0635.
Meanwhile, the 10-DMA and a one-week-old support line limit the bear’s entry around 1.0520.