- EUR/USD's drop below 1.12 seen yesterday was short-lived, possibly due to a tightening of US-German yield spreads in the US session.
- The US-China trade optimism could keep the EUR better bid in Europe. The recovery rally, however, would be erased if the Eurozone services PMI and retail sales, due for release today, disappoint expectations.
EUR/USD is currently attempting a recovery rally, having defended the psychological support of 1.12 yesterday on a closing basis.
The shared currency fell to 1.1184 on Tuesday, the lowest level since March 7, on growing US-Eurozone macro data divergence.
The decline to 3.5-week lows below 1.12, however, was short-lived, as the spread between the 10-year US and German government bond yields eased by three basis points to 253 basis points following the release of the dismal US durable goods orders data during the North American trading hours.
With the quick recovery, the bullish divergence of the 4-hour chart relative strength index (RSI) has gained credence. Add to that the optimism generated by the Financial Times report stating that the top US and Chinese officials have resolved most of the issues blocking the long-awaited trade deal and the EUR appears on track for a stronger corrective bounce to 1.1250.
The oversold bounce will likely gather pace if the German and aggregate Eurozone services PMI numbers for March print above estimates, alleviating concerns of deeper economic slowdown.
Post-PMIs, the focus would shift to Eurozone retail sales, due for release at 09:00 GMT. The data is expected to show the consumer spending rose just 0.2 percent month-on-month in February, having risen by 1.3 percent in the preceding month. An above-forecast reading will likely strengthen the case for a corrective rally in the EUR.
Technical Levels
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