- EUR/USD portrays a corrective pullback from two-month low.
- US dollar steps back on the way to highest weekly gains since September 2020.
- US Treasury yields seesaw amid declining inflation expectations, stimulus hopes.
- Second-tier data from the bloc, risk catalysts could offer a quiet end to the volatile week.
EUR/USD flirts with intraday top surrounding 1.1925, recently easing to 1.1920, amid the first positive day in three, up 0.10% on a day, heading into Friday’s European session.
The currency major pair dropped to the lowest since mid-April but failed to conquer the 1.1900 threshold. The pair sellers stepped back afterwards as the US dollar consolidates recent gains amid a sluggish session and mildly optimistic markets.
Behind the cautious optimism of the markets could be the chatters relating to US President Joe Biden’s infrastructure spending plan and a three-month low of US inflation expectations. As per that latest 10-year breakeven inflation rate data from the St. Louis Federal Reserve (FRED), inflation expectations are the lowest since March. This suggests that the markets believe in the Fed’s comments over “transitory” inflation jump and dims the US dollar’s safe-haven demand.
It should be observed that a lack of major data/events and complex signals of the ECB policymakers, over the tapering, offers sluggish markets. Bundesbank President, also ECB board member, Jens Weidmann backed an end of Pandemic Emergency Purchase Programme (PEPP) the previous day. However, the European Central Bank (ECB) Governing Council member Ignazio Visco said late Thursday that “supply and demand issues complicate the inflation outlook.”
Amid these plays, the US dollar index (DXY) steps back from a two-month top but stays on the road to the highest weekly gains since September 2020, down 0.10% around 91.82 whereas S&P 500 Futures print mild gains by the press time. Though, the US 10-year Treasury yields struggle for fresh direction and can keep EUR/USD traders troubled.
Moving on, the German Producer Price Index (PPI) and Eurozone Economy and Finance Ministers’ meeting may offer intermediate moves to the EUR/USD pair amid a likely lacklustre day. However, US inflation expectations and DXY moves will be the key to watch.
Technical analysis
EUR/USD battles support-turned-resistance from March 2020, around 1.1925-30, but bearish MACD keeps sellers hopeful even as the 1.1900 threshold tests intraday bears. It’s worth noting that a corrective pullback beyond the previous support line, around $1,930, will aim for a 200-day SMA level near 1.2000 whereas a downside break of 1.1900 will target multiple tops marked amid late March and initial April month’s trading around the 1.1800 round figure.
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