EUR/USD grinds lower towards 1.1900 on firmer USD

EUR/USD fails to extend the previous week’s recovery moves, down 0.11% intraday around 1.1920, heading into Monday’s European session. The sluggish market fails to tame the pair sellers as fresh fears of inflation and the coronavirus (COVID-19) favor the US dollar’s demand, due to its risk-safety allure.

That said, the US dollar index (DXY) prints the strongest intraday gains in over a week, up 0.07% on a day around 91.88, by the press time.

US Core Personal Consumption Expenditures (PCE) Price Index, published Friday, seems to be the main catalyst behind the greenback’s recovery moves. The Fed’s preferred gauge of Inflation jumped to the highest in the near three decades with 3.4% YoY figures in May and probed the Fed’s sustained repeated efforts to tame inflation fears and chatters over rate hikes, as well as tapering.

Following the US Core PCE release, Minneapolis Federal Reserve President Neel Kashkari said, “Expecting to see some of the very high inflation readings to return back down to normal." On the contrary, Boston Federal Reserve President Eric Rosengren said on Friday that they have to think about some of the side effects of a low-for-long interest rate strategy, as reported by Reuters.

In addition to the fears of the Fed’s policy normalization, fresh covid woes from Australia, Japan and the UK also favor the US dollar and weigh on the EUR/USD prices. While Australia’s Sydney witnesses stringent and more expanded activity restrictions following the jump in virus infections and strain cases, German Chancellor Angela Merkel pushes to ban British travelers due to the Delta plus variant’s fears. Elsewhere, Japan’s holding Olympics and Paralympics is also criticized broadly as the nation struggles with another wave of the pandemic.

It’s worth noting that a light calendar and thin feeds also contributed to the market’s extension of late Friday’s pullback.

Moving on, the Fed policymakers’ justification of the US inflation fears will be the key directive for the EUR/USD prices ahead of Friday’s key jobs report. Should the Fedspeak ease their rejection to the reflation tenure, the quote may extend the latest weakness towards the monthly low, also the lowest since early Apri.

Technical analysis

Multiple failures to cross 200-day EMA join Friday’s bearish candlestick formation, namely gravestone Doji, to keep EUR/USD sellers hopeful of refreshing the monthly low.