- EUR/USD is holding the recent rebound from three-month lows.
- Covid concerns, China’s growth slowdown spook investors, lift the USD.
- Powell-led weaker yields cushion the downside ahead of fresh US data.
EUR/USD is alternating between gains and losses, consolidating the recent recovery above 1.1800, as the US dollar attempts a bounce amid worsening market mood.
The greenback licks its wounds, finding some support from the risk-off sentiment, in light of the looming concerns over the Delta covid variant contagion and slowing Chinese economic growth. The Chinese economy expanded by 7.9% YoY in Q2, although fell short of the estimate of 8.1% growth.
On Wednesday, the main currency pair hit the lowest levels since April at 1.1772 amid a broadly stronger US dollar, as hotter inflation data spurred Fed’s hawkish expectations. However, in the American session, EUR/USD staged an impressive bounce after Fed Chair Jerome Powell poured cold water on hopes of potential monetary policy normalization.
Powell, in his Congressional testimony, signaled that withdrawal of monetary policy support is still distant, as the economic recovery is not there yet. Traders now await day 2 of Powell’s testimony for fresh trading incentives.
In the meantime, a slew of US macro news and broader market sentiment will have a significant impact on the major, as the downside remains cushioned by the persisting weakness in the Treasury yields.
EUR/USD: Technical levels
“A clear break of the 1.1860 figure, comprising the stated wedge’s upper line, becomes necessary for the EUR/USD bulls to aim for a 200-SMA level of 1.1985. Meanwhile, pullback moves will recall the 1.1800 round figure to the chart before testing the bullish formation’s support line, around 1.1765,” FXStreet’s Analyst Anil Panchal explains.
EUR/USD: Additional levels
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