EUR/USD rebound pauses around 1.0750, German inflation, US employment clues eyed

• EUR/USD grinds higher after bouncing off 10-week low.
• US Dollar traces yields to retreat from multi-day peak amid uncertainty for US debt ceiling deal in Congress.
• US data came in mixed, month-end positioning join anxiety ahead of key events to recall Euro buyers.
• Germany’s HICP, US JOLTS Job Openings and Fedspeak will decorate calendar, Senate will vote on measures to avoid US default.

 

EUR/USD struggles to extend the latest recovery from the lowest levels since March, grinding near 1.0735-30 amid early Wednesday morning in Asia, after snapping a five-day downtrend. That said, the Euro pair cheered the US Dollar’s pullback from the multi-day high the previous day but depicts the market’s cautious mood ahead of the top-tier data/events scheduled for publishing today.

US Dollar Index (DXY) rose to the highest levels since mid-March on Tuesday before snapping a five-day uptrend, as well as positing the biggest daily loss since April 19, while closing the North American trading session around 104.05.

While tracing the US Dollar’s latest retreat, the month-end consolidation and cautious mood ahead of the top-tier data/events gain major attention. Also challenging the greenback could be the mixed US data.

That said, the US Conference Board's (CB) Consumer Confidence Index edged lower to 102.30 for May from an upwardly revised 103.70 prior marked in April (from 101.30). Additional details of the survey report mentioned that the one-year consumer inflation expectations ticked down to 6.1% in May from 6.2% in April. Further, US House Price Index rose 0.6% MoM versus 0.2% expected and 0.7% prior (revised from 0.5%) whereas the S&P/Case-Shiller Home Price Indices dropped to -1.1% YoY in March versus 0.4% prior and -1.6% anticipated. Additionally, the Dallas Fed Manufacturing Business Index for May dropped further to -29.1 from -23.4 and versus -19.6 market expectations.

Following the data, Richmond Fed President Thomas Barkin said that he is seeing evidence that interest rate hikes are curbing demand.

Elsewhere, Republican representative Chip Roy said McCarthy should pull the debt ceiling bill, per Reuters, which in turn raises challenges for the US debt ceiling deal as it heads to the Republican-controlled Senate for voting.

On the other hand, Spain marked downbeat inflation numbers for May and hence raised expectations of softer prints of today’s German inflation figures, as well as highlighting a lesser need for the European Central Bank (ECB) to push for higher rates. Even so, ECB Governing Council Gediminas Šimkus said on Tuesday that he expects a 25 basis points (bps) rate hike in June and July.

Amid these plays, Wall Street closed mixed but the US Treasury bond yields remained pressured.

Looking ahead, Germany’s inflation gauge, namely the Harmonized Index of Consumer Prices for May, will precede the US JOLTS Job Openings for April and China Purchasing Managers Index for May to watch on the calendar for clear directions. However, major attention should be given to the voting on the US debt ceiling agreement in the Senate.

Technical analysis

A daily closing beyond the monthly descending resistance line, now immediate support near 1.0700, directs EUR/USD bulls toward the 100-DMA hurdle of around 1.0815.