EUR/USD pauses three-day uptrend near 1.0550 ahead of EU/US PMI
|- EUR/USD remains sidelined after refreshing fortnight high the previous day.
- Recession woes mount in the Eurozone as Germany fears maintenance shutdown of Russian gas pipeline.
- Softer US inflation expectations, Fed Chair Powell’s Testimony put a floor under the prices.
- Sluggish session ahead of June’s PMI, Powell’s Testimony 2.0 challenges momentum traders.
EUR/USD lacks momentum strength as it takes round to 1.0560-70 heading into Thursday’s European session. The major currency pair’s latest inaction could be linked to the mixed catalysts surrounding the Eurozone and the US.
Starting with the bloc, economic slowdown fears mount in the old continent as Russia braces for a maintenance halt in the gas pipeline to Germany. It should be noted, however, that the Reuters poll suggesting the European Central Bank’s (ECB) 0.75% rate hike in 2022 challenges the pair’s downside move.
On other hand, a four-month low in the US inflation expectations and Fed Chair Jerome Powell’s Testimony in favor of the current monetary policy propel EUR/USD prices.
That said, the US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, dropped for the third consecutive day to the fresh low since late February, at 2.54%, by the end of Wednesday’s North American session. On the other hand, Fed’s Powell considered the present monetary policy bias appropriate to battle the inflation woes. It’s worth noting, however, that the Fed Boss’s readiness to use the aggressive measures, irrespective of their consequences, seemed to have put a floor under the greenback. On the same line is the latest news from Reuters signaling an upbeat print of June’s jobs report.
Elsewhere, a lack of moves in the bond markets, as well as by the stock futures, also restricts immediate EUR/USD performance.
It’s worth noting that the EUR/USD traders should wait for the preliminary readings of the S&P Global PMIs for June, to be initially published for Germany before figures relating to the Eurozone and the US. Also important will be the second round of Fed Chair Jerome Powell’s Testimony.
Should the scheduled PMIs arrive as softer, the EUR/USD pair may have a reason to consolidate the latest gains. Further, Fed Chair Powell’s rejection of further rate hikes, other than what’s already known, could also weigh on the quote.
Also read: S&P Global US PMI June Preview: Waiting for recession
Technical analysis
EUR/USD defends the previous day’s breakout of the 10-DMA, the first since early June, which in turn keeps buyers hopeful. Additionally suggesting the quote’s further upside is the looming bull cross of the MACD.
With this, the EUR/USD buyers are all set to challenge the 1.0610 hurdle comprising the 50-DMA and the 21-DMA.
On the contrary, pullback moves remain elusive until the prices remain beyond the 10-DMA level of 1.0500.
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