EUR/USD consolidates above 21-D SMA (1.1653) awaiting key EZ and US data events

EUR/USD is currently trading at 1.1680 within an early Asia range of 10 pips as the price consolidates Friday's price action in a quiet setting where the single currency was able to steadily rise above 1.1685 from the London lows of 1.1613 -(The single currency had accelerated lower to 1.1613 after breaking below 21-DMA 1.1651).

FX markets were pretty quiet into Friday's close with the greenback little changed. It has climbed higher in the DXY by 0.36% by the end of European markets, (EUR -0.4 as NY walked in on Friday), but gave back those gains enabling the G10's to take advantage of a return ticket. Indeed, risk sentiment was mixed to end the week, with equities little changed although robust into the close as investors had been encouraged on Thursday that signs of a full-blown trade war were receding. 

Elsewhere, the Fed's Monetary Policy Report conveyed an upbeat tone on recent economic developments and signalled a continued gradual approach to rate hikes - however, the market paid little attention. We also had some Fedspeak that came from Kaplan, who expects 1-2 more hikes this year but was showing his own concerns about trade. Bostic sees inflation approaching 2% as a sign of economic health. From weekend news, German press reported that Bundesbank president Weidmann warned the German government that the economy was slowing more than expected.

While markets await EZ CPI this week as the key scheduled local event, analysts at Nomura offered a general view on the EZ:

• We are more downbeat about the euro area medium-term growth outlook, reflecting more negative cyclical and structural factors.
• We expect headline and core inflation to rise gradually in the coming months off more pressing capacity pressures.
• We expect the ECB to lift its deposit facility rate in September 2019, and then raise all policy rates by a further 10bp in Q4 2019.

For the US week ahead

Markets are looking for a healthy reading on June retail sales as well as industrial production, which would be consistent with solid underlying economic momentum. "We forecast a steady 0.4% m-o-m increase in June core (“control”) retail sales after a solid 0.5% m-o-m in May, consistent with firm momentum in personal spending in Q2... / ...We forecast a robust 0.9% m-o-m gain in industrial production in June after a 0.1% decline in May, " analysts at Nomura forecasted.

EUR/USD levels

Valeria Bednarik, chief analyst at FXStreet explained that the pair closed the day below 1.1720, the 23.6% retracement of its April/May decline, which limits the upward potential:

"Ever since hitting lows at around 1.1510, the pair has been trading below the 38.2% retracement of the same decline at 1.1855, and only above this last bulls could retake control. Technically, the daily chart presents a mild positive stance, as the pair finished a couple of pips above its 20 DMA, which anyway lacks directional strength, but well below the larger ones. The Momentum indicator bounced from its mid-line, maintaining its bullish slope, while the RSI heads nowhere around 49. Shorter term and according to the 4 hours chart, the price is stuck in a congestion of moving averages, a sign of uncertainty, while technical indicators turned flat below their mid-lines, skewing the risk toward the downside."