- EUR/USD remains sidelined around yearly low, eases from intraday high of late.
- DXY befits from risk-off mood, firmer Treasury yields.
- Covid, stimulus and budget jitters sour sentiment amid a quiet session.
- Fianl readings of German CPI, preliminary US inflation for July will be the key data, risk catalysts are important too.
EUR/USD defends the 1.1700 threshold, retreats from the day’s high of 1.1725, as bears take a breather amid a quiet session heading into the European hours on Wednesday. The major currency pair dropped for consecutive eights in the last before the recent consolidation ahead of the key US inflation numbers for July.
While a lack of major data/events in Asia probes the quote’s fall targeting the yearly bottom, bears remain hopeful as the passage of the US infrastructure spending plan backs the tapering woes and underpin the US dollar’s safe-haven demand. Also favoring the greenback could be the virus concerns in the West and Asia–Pacific.
The USD bulls seem to have hit a bump as policymakers jostle over the key debt limit even as they’re yet to cross two more hurdles before announcing the $1.2 trillion infrastructure aid plan. Furthermore, Reuters news suggesting that the European Union will not change its safe travel list this week, allowing non-essential travel from the United States to continue for the time being despite a surge in COVID cases there, helps the EUR a bit versus its US counterpart.
Amid these plays, The US Dollar Index (DXY) prints a four-day winning streak to poke July’s high around 93.20. In doing so, the greenback gauge seems to track the firmer US Treasury yields while cheering the downbeat stock futures.
It’s worth noting that comments from US Atlanta Federal Reserve President Raphael Bostic, Richmond Fed President Thomas Barkin and Chicago Fed President Charles Evans contrast to those of the European Central Bank (ECB) policymakers and challenge the EUR/USD moves.
Hence, the pair traders will keep their eyes on the US inflation figures for July, with the headline figure likely to ease to 5.3% YoY from 5.4%, to reconfirm the latest taper tantrums that also favor the USD.
Technical analysis
A horizontal line comprising the 2021 trough, around 1.1700, questions the EUR/USD pair’s downside amid oversold RSI conditions. It should be noted, however, that the corrective pullback needs to cross the immediate horizontal hurdle surrounding 1.1760 to revisit the 1.1800 round figure. In a case wherein the quote drops below 1.1700, a 100-pip fall targeting the late 2020 lows close to 1.1600 can’t be ruled out.
