- EUR/USD remains depressed around three-month low, amid four-day downtrend.
- Upbeat Treasury yields, covid headlines back US dollar.
- German Retail Sales, ECB’s Lagarde can offer additional directives.
EUR/USD stays heavy for the fourth consecutive day around 1.1850, down 0.07% intraday, heading into Thursday’s European session. The currency major pair dropped to the lowest since early April the previous day but a four-month-old horizontal support test bears afterward.
The US dollar index (DXY) seesaws around the highest levels in three months, flashed on Wednesday, as market players seek safety amid escalating coronavirus (COVID-19) concerns in Asia-Pacific. That said, Australia witnesses local lockdowns with a higher covid count while Indonesia is up for a national emergency during July 02-20. Further, the UK also prints the highest infections in 2021.
Other than the virus-led risk-aversion, upbeat US data and the market’s optimism for the world’s largest economy also back the USD. On Wednesday, the US ADP Employment Change and Chicago Purchasing Managers’ Index both crossed market consensus and raised hopes for a firmer US Nonfarm Payrolls (NFP). However, the greenback bulls are cautious ahead of today’s ISM Manufacturing PMI for June, expected 61.00 versus 61.2 prior.
Read: US ISM Manufacturing June Preview: Expansion to continue but how severe is the labor shortage?
It’s worth mentioning that the increased odds of the US Federal Reserve’s (Fed) monetary policy adjustments, backed by recently hawkish Fedspeak, also favor the US dollar.
On the other hand, EU inflation figures matched upbeat forecasts but remained well below the ECB’s target. Hence, EUR traders will keep their eyes on German Retail Sales and ECB President Christine Lagarde’s speech for further confirmation of Pandemic Emergency Purchase Programme (PEPP) tapering. That said, German Retail Sales for May can jump 10.1% versus 4.4% prior and favor the Bundesbank to push for monetary policy tightening.
Against this backdrop, US 10-year Treasury yields recover from the weekly bottom while the stock futures are mildly bid by the press time.
The ISM PMI details need to back hopes of a firmer NFP print to back the EUR/USD bears. Any disappointment may have a little scope to recall the buyers, amid sour sentiment and expectations of comparatively downbeat fundamentals from Europe, despite ECB’s Lagarde rejects it.
Technical analysis
Bearish MACD and sustained trading below 10-day SMA (DMA), as well as a descending trend line from early June, keeps EUR/USD sellers hopeful. However, a clear break of the 1.1845 support, comprising lows marked in early March and late June, becomes necessary for them to keep the reins.
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