EUR/USD bulls keep reins around mid-1.0900s on Juneteenth holiday, PMIs, Fed Chair Powell eyed

• EUR/USD seesaws around five-week high after posting the biggest weekly gain since January.
• ECB out-haws Fed to keep Euro buyers hopeful amid sluggish session, upbeat sentiment.
• Mixed US data, hopes of Fed policy pivot supersede hawkish Fed talks and favor EUR/USD bulls.
• US stock and bond markets are off due to Juneteenth holiday and can restrict market moves.

EUR/USD remains sidelined near 1.0950 as bulls seek more clues while keeping control at the highest levels in over a week. That said, the Euro pair jumped the most since early January the previous week as the European Central Bank (ECB) out-hawked the Federal Reserve (Fed). Also favoring the Euro bulls were mostly mixed US data and receding fears of the economic slowdown. It should be noted, however, that Friday’s upbeat US data and hawkish Fed signals probed the pair buyers at the highest levels since early May, before the latest inaction at the top.

Juneteenth holiday in the US joins the light calendar to restrict immediate EUR/USD moves even as the latest headlines surrounding China allowed markets to remain hopeful and weigh on the US Dollar.

That said, US Secretary of State Antony Blinken and Chinese Foreign Minister Qin Gang on Sunday held what both called candid and constructive talks on their differences from Taiwan to trade but seemed to agree on little beyond keeping the conversation going with an eventual meeting in Washington, reported Reuters. Further, news from the South China Morning Post (SCMP) quoting China State Council also flashes positive signals for the sentiment as it said, “The Council considered a batch of macroeconomic policies designed to expand ‘effective demand’, strengthen the real economy and defuse risks in key areas.”

On the other hand, German Chancellor Olaf Scholz faces a delicate balancing act this week at the German-Chinese government consultations in Berlin, per Reuters. The news also signaled that the German Leader is seeking to maintain good ties with Germany's largest trade partner while complying with a G7 pledge to "de-risk" from Beijing.

On Friday, the preliminary readings of the University of Michigan (UoM) Consumer Sentiment Index (CSI) for June improved but the US inflation expectations eased and tamed the US Dollar bulls. Further, Fed policymakers have been hawkish of late and challenged the EUR/USD bulls.

That said, the latest US Federal Reserve (Fed) Monetary Policy Report to the US Congress, published Friday stated, “Inflation in the US is well above target and the labor market remains very tight,” as per Reuters. The report also mentioned, per Reuters, “Outlook for funds rate is subject to considerable uncertainty.”

Additionally, Richmond Fed President Thomas Barkin said, “Raising rates further could create the risk of a more significant slowdown in the economy.” The policymaker, however, also added that the Fed can do comfortable more to slow the resilient US economy, which in turn triggered a jump in the 2-year Treasury bond yields to 4.75% and helped the US Dollar to get off the lows.

Elsewhere, “US economy is still ‘ripping along’,” said Federal Reserve Governor Christopher Waller on Friday while adding that everything seems to be calm in the US banking system, as reported by Reuters.

On the other hand, the ECB’s 0.25% rate hike and readiness to lift the rates in July allowed the Euro to ignore mostly downbeat data in the bloc, as well as in Germany, which in turn highlights this week’s preliminary PMIs for June for clear directions. Should the activity data ease, the EUR/USD may witness the much-awaited pullback. Additionally important to watch will be Fed Chair Powell’s testimony as concerns about the July Fed rate hike being the last from the US central bank weighed on the US Dollar of late.

Technical analysis

Bearish spinning top candlestick at the multi-day high joins nearly overbought RSI conditions to challenge EUR/USD buyers.