EUR/USD bears attack 1.1200 as ECB hawks retreat on inflation concern, mid-tier EU/US data eyed

EUR/USD remains on the back foot around 1.1200 while fading the previous day’s bounce off the weekly low amid the early hours of Thursday’s Asian session. In doing so, the Euro pair justifies recent doubts about the European Central Bank’s (ECB) hawkish moves amid inflation concerns, as well as justify the US Dollar strength, while keeping the bears on the table after a two-day downtrend from the 17-month high.

Although the final readings of the Eurozone Core inflation, per the Core Harmonized Index of Consumer Prices (HICP), improved for June on a monthly basis, to 0.4% MoM versus 0.3% previous forecasts, Governing Council member Yannis Stournaras told CGTN Europe on Wednesday that he wasn't sure whether the ECB would hike rates again after 25 bps increase next week. The policymaker also argued that the inflation is falling adding that further increases of interest rates might damage the economy.

It’s worth noting that the US Dollar Index (DXY) rose on the last two consecutive days while refreshing the weekly top to around 100.55, close to 100.30 by the press time, despite witnessing downbeat US housing data. The reason could be linked to the market’s concerns that the US Federal Reserve (Fed) may keep the interest rates higher for a longer time after lifting them in July.

On Wednesday, US Building Permits for June marked a contraction of 3.7% versus the previous increase of 5.6% (revised) whereas the Housing Starts also slumped 8.0% for the said period from 15.7% revised prior.

Alternatively, the previously released slower growth of the US Retail Sales for June contrasted with promising details to defend the Federal Reserve in keeping the rates higher for longer, as well as help in announcing a 0.25% rate hike in July. The same triggered the US Dollar’s corrective bounce off the 15-month low on Tuesday and helped defend the recovery on Wednesday despite downbeat US housing data.

Elsewhere, hopes of witnessing firmer earnings by the US banks, both top-tier and regional, due to the higher rates join mixed concerns about the Sino-US ties to allow Wall Street to edge higher while weighing on the US Treasury bond yields at the same time.

Moving on, the preliminary readings for Eurozone’s Consumer Confidence for July will precede the US Initial Jobless Claims and Existing Home Sales to decorate the economic calendar. However, major attention should be given to the risk catalysts for clear directions.

Technical analysis

Overbought RSI joined the failure to cross the 1.1280 horizontal resistance zone, comprising levels marked during early 2022, to trigger the EUR/USD pair’s pullback. That said, the receding bullish bias of the MACD signals adds strength to the downside bias suggesting a fall towards 1.1145-40 support confluence including the 10-DMA and previous resistance line stretched from February.