- EUR/USD stays on the back foot near early April levels.
- US Treasury yields defend greenback bulls even as market sentiment consolidates.
- US Senate Majority Leader Chuck Schumer announced Infrastructure Bill will be voted on Wednesday but not every detail.
- Sino-American headlines, virus updates could offer fresh direction, German PPI, ECB Bank Lending Survey also important to watch.
EUR/USD retreats to an intraday low of 1.1790, down 0.09% on a day, heading into Tuesday’s European session. That being said, the US dollar’s sustained strength keeps weighing on the currency major pair for the fourth consecutive day.
The US Dollar Index (DXY) jumped to the fresh three-month high the previous day, up 0.05% intraday near 92.86 by the press time. While the Delta covid variant updates and the US-China tussles earlier put a safe-haven bid under the greenback, US Treasury yields’ rebound seems to favor the DXY of late.
The US 10-year Treasury yield pauses a four-day downtrend near the lowest levels since February, adding one basis point (bp) to 1.209% at the latest. In doing so, the risk barometer struggles for clear direction amid mixed catalysts.
On the positive side, US Senate Majority Leader Chuck Schumer’s announcement of a procedural vote on an infrastructure bill, on Wednesday, as well as hopes of more vaccines in Australia seems to probe the pessimists. Even so, US diplomat Schumer’s comments suggesting, “Wednesday not a deadline for every detail of the bill,” join Sino-American tussles to trouble the traders.
It’s worth noting that the US recently raised a travel alert for the UK to convey Delta variant fears, adding challenges to market sentiment. On the same line, South Australia announced a seven-day lockdown and Victoria extends activity restrictions for one more week to roil the risk appetite.
Amid these plays, stock futures print mild gains but equities in Asia–Pacific keep the red by the time of the press.
On Monday, fears of virus strain dragging the recovery moves from the pandemic joined reflation fears to fetch EUR/USD to the fresh low since April. However, a lack of major data and cautious sentiment ahead of Thursday’s ECB triggered the pair traders’ bounce afterward.
Moving on, the German Producer Price Index (PPI) for June, expected 8.5% versus 7.2% YoY, may keep the ECB hawks hopeful and back the EUR/USD but the details of the ECB Banking Lending Survey, will be observed for further details. Above all, the market sentiment remains the key driver for the pair ahead of the ECB.
Technical analysis
EUR/USD bears attack an upward sloping support line from November 2020, around 1.1765. However, the lower line of the monthly falling wedge bullish chart pattern, around the 1.1700 threshold, will challenge the pair’s weakness below the stated trend line support. On the contrary, a surprise up-move, or consolidation, needs to cross the wedge’s upper line at 1.1835 to renew bullish hopes targeting the 200-DMA level of 1.2008.
