• EUR/USD comes under some selling pressure on Tuesday amid a modest USD strength.
  • Rebounding US bond yields underpins the USD; less hawkish Fed expectations cap gains.
  • Traders now look to the US CPI for some impetus ahead of the ECB decision on Thursday.

The EUR/USD pair meets with some supply during the Asian session on Tuesday and snaps a three-day winning streak to a nearly one-month high touched the previous day. A modest recovery in the US Treasury bond yields assists the US Dollar to stall its recent sharp pullback from a multi-week high, which, in turn, is seen exerting downward pressure on the major. The uptick in the US bond yields comes after the US authorities moved to limit the fallout from the sudden collapse of Silicon Valley Bank (SNB). In fact, the Federal Reserve on Sunday announced that it will make available additional funding to eligible depository institutions to help assure banks can meet the needs of all their depositors. Adding to this, President Joe Biden said the administration's swift actions to ensure depositors can access their funds in SVB and Signature Bank should give Americans confidence that the US banking system was safe.

The upside for the USD, however, is likely to remain capped amid expectations that the US central bank will slow, if not halt, its interest rate-hiking cycle in the wake of the strain on the US banking system. Apart from this, rising bets for another jumbo 50 bps rate hike by the European Central Bank (ECB) should continue to underpin the shared currency and contribute to limiting the downside for the EUR/USD pair. Traders might also refrain from placing aggressive bets and prefer to move to the sidelines ahead of the key data/event risks. This week's rather busy US economic docket kicks off with the release of the latest consumer inflation figures on Tuesday, followed by the Producer Price Index (PPI) and monthly Retail Sales figures on Wednesday. Apart from this, investors will take cues from the ECB monetary policy decision, scheduled to be announced on Thursday, to determine the next leg of a directional move for the major.

The aforementioned mixed fundamental backdrop makes it prudent to wait for strong follow-through selling before confirming that the recent bounce from a technically significant 100-day Simple Moving Average (SMA) has run out of steam. Nevertheless, the EUR/USD pair, for now, seems to have stabilized around the 1.0700 mark and is more likely to consolidate in a narrow band heading into the crucial US macro data and the ECB event.

Technical Outlook

From a technical perspective, the overnight failure to build on the momentum beyond the 1.0725-1.0730 confluence and the subsequent pullback warrants caution for bullish traders. The mentioned hurdle comprises the 50-day SMA and the 38.2% Fibonacci retracement level of the recent pullback from the 1.1035 region, which should now act as a pivotal point. A convincing breakthrough, leading to a subsequent move beyond the overnight swing high, around the 1.0750 zone, will set the stage for additional gains. The EUR/USD pair might then aim to surpass the 50% Fibo. level, around the 1.0775 region, and reclaim the 1.0800 mark before eventually climbing to 61.8% Fibo. level, around the 1.0835-1.0840 region.

On the flip side, any further decline below the 1.0700 mark is likely to find decent support near the 1.0645 zone (23.6% Fibo. level). Sustained weakness below might prompt some technical selling, which, in turn, will make the EUR/USD pair vulnerable to weaken further below the 1.0600 mark and challenge the 100-day SMA, currently around the 1.0540 region. The latter should act as a strong base for spot prices, which if broken decisively will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.

fxsoriginal

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD remains on the defensive near 0.6600 amid mixed Australian PMI, Chinese economic woes

AUD/USD remains on the defensive near 0.6600 amid mixed Australian PMI, Chinese economic woes

The AUD/USD pair trades in negative territory for the seventh consecutive day around 0.6610 on Wednesday during the early Asian session. The mixed flash Australia’s Judo Bank Purchasing Managers Index fails to boost the Aussie. Traders await the US preliminary S&P Global PMIs for June for fresh impetus. 

AUD/USD News

EUR/USD backslides in runup to key midweek data prints

EUR/USD backslides in runup to key midweek data prints

EUR/USD dipped one-third of one percent on Tuesday as investors knuckle down for the wait to a double-header of Purchasing Managers Index figures due from both the EU and the US on Wednesday.

EUR/USD News

Gold price consolidates near weekly peak as traders look to US data for fresh cues

Gold price consolidates near weekly peak as traders look to US data for fresh cues

Gold price struggles to capitalize on Tuesday's positive move amid a modest US Dollar strength, though the downside remains cushioned in the wake of a generally softer risk tone. Furthermore, dovish Fed expectations should cap any meaningful USD appreciation and act as a tailwind for the non-yielding yellow metal.

Gold News

Ethereum ETFs flows data pour in after crossing $1 billion trading volume in first day of launch

Ethereum ETFs flows data pour in after crossing $1 billion trading volume in first day of launch

Ethereum is down about 1% on Tuesday as spot ETH ETFs crossed the $1 billion mark in trading volume. Given its recent price movement, ETH may replicate the price of Bitcoin post-spot BTC ETF launch.

Read more

US S&P Global PMIs Preview: Economic expansion could struggle in July Premium

US S&P Global PMIs Preview: Economic expansion could struggle in July

On Wednesday, S&P Global will release advanced readings for the United States (US) Purchasing Managers Indexes (PMIs) for July, a monthly survey of business activity. The survey is anticipated to indicate that US economic activity in the private sector faced mixed trends during the current month.

Read more

Majors

Cryptocurrencies

Signatures