EUR/USD retreats towards 1.1700 on confirmed death-cross, focus on PMI

• EUR/USD grinds lower around three-month low, reverses early Asian gains of late.
• Stimulus, vaccine news keep risk appetite firmer despite covid woes.
• Bears seek PMIs to justify ECB’s dovish tilt, else Fed hawks can take over the next week.

EUR/USD remains pressured around 1.1770, unchanged on a day, heading into Friday’s European session. The sellers keep reins following the European Central Bank’s (ECB) bearish bias and amid the covid woes but a cautious optimism in the market seem to put a floor under the prices ahead of the key activity numbers from Germany, Eurozone and the US.

US policymakers stay hopeful of getting US President Joe Biden’s infrastructure spending bill passed through the house, despite being rejected for opening debate. The same join a relief to lawmakers offered by the US Congressional Budget Office (CBO) when it said, per Bloomberg, “US lawmakers likely have until October or November to raise or suspend the debt limit.” This will help the diplomats to have a bit more time than the July 31 deadline when the debt limit will need a change from the $22 trillion levels set in 2019.

While the risk-on catalysts challenge the US dollar bulls, ECB’s readiness to accept the change in rate guidance, due to the inflation jitters, keeps sellers hopeful. It should, however, be noted that the escalating covid woes in Australia and the UK, coupled with the gradually firming Delta COVID-19 cases in the bloc, challenge the optimism.

Against this backdrop, S&P 500 Futures print 0.23% intraday gains after Wall Street benchmarks closed positive for the third day in a row, grinding lower though.

Moving on, German PMIs are likely to be mixed, with Services fueling Composite figures, but the Eurozone numbers could be stronger and help the region’s currency. However, firmer data also raises doubts over the ECB performance, as Germany backs tapering, which in turn may restrict EUR/USD recovery. Following that, the US PMIs could print soft figures and facilitate the Fed’s move for the next week, likely dovish.

Read: US Markit PMIs Preview: Pre-weekend dollar boost? Downbeat figures could exacerbate risk-off mood

Technical analysis

EUR/USD finally confirmed a “death-cross” bearish pattern, a 50-DMA run-up beyond 200-DMA suggesting a short-term downside. However, a 12-day-old falling trend line and support line of a monthly falling wedge, respectively around 1.1755 and 1.1725, will restrict the short-term EUR/USD downturn ahead of the yearly low near the 1.1700 round figures.