- EUR/USD consolidates weekly losses, the heaviest since June, around yearly bottom.
- USD eases from 11-month top as vaccine chatters battle covid woes amid a light calendar in Asia.
- US Treasury yields, S&P 500 Futures stay pressured, commodity recover.
- German PPI can offer intermediate direction but covid/vaccine updates keep the driver’s seat.
EUR/USD retraces from the 2021 lows to 1.1686, up 0.10% intraday, heading into Friday’s European session. The consolidation could be linked to the US dollar pullback from the highest levels since November 2020.
The US Dollar Index (DXY) steps back from the multi-day high refreshed early in Asia, down 0.05% to 93.52 by the press time.
While the coronavirus concerns remain on the table and challenge the market sentiment, underpinning the US dollar’s safe-haven demand, vaccine optimism and stimulus news from Japan could be linked for the latest DXY pullback.
New Zealand extends an initial three-day national lockdown to August 24 after the covid infections spread out from Auckland to the capital Wellington. On the other hand, Australia marks an easy near 700 daily cases after refreshing the record top the previous day. Elsewhere, the UK reports a multi-day high death toll and the US numbers are also worrisome while China’s daily COVID-19 cases dropped to 33 versus 46 marked on Thursday. Furthermore, Germany reports the highest daily covid cases in three months.
Talking about the vaccine optimism, the UK’s push for vaccinating 12–17 years old and the American rush for booster shots join the Western leaders’ readiness to help the struggling Asia–Pacific nations with vaccines.
On the same line was the news from Reuters that Japan's cabinet approval of a 9.27 billion yen ($84.50 million) emergency budget to help the country's self-defense forces carry out medical aid amid the coronavirus pandemic.
It should be noted that the South China Morning Post (SCMP) report signaling Beijing's easy move on Hong Kong also slow down the rush to risk-safety. “Beijing unexpectedly postpones vote on adding anti-sanctions legislation to Hong Kong’s Basic Law,” said SCMP.
Against this backdrop, US 10-year Treasury yields seesaw around 1.24% whereas S&P 500 Futures drop 0.10% at the latest.
Given the grim conditions relating to the virus, the latest EUR/USD consolidation is likely to fade soon, which in turn highlights COVID-19 headlines as the key catalyst. For an immediate basis, the German Producer Price Index (PPI) for July, expected 9.2% versus 8.5% prior, can direct the quote’s moves.
Technical analysis
EUR/USD seesaws around the neck-line of a bearish head-and-shoulders chart pattern on the four-hour (4H) play. Given the nearness of the RSI line to the oversold area, the quote may struggle to confirm the bearish formation. However, bulls are less likely to return until the major currency pair remains below a convergence of monthly high and 200-SMA, near 1.1800–1805.