EUR/USD retreats towards 1.0450 near fortnight low ahead of Eurozone inflation, US ISM PMI

• EUR/USD fades bounce off two-week bottom, pares biggest daily gains in a fortnight.
• Softer US spending, PCE inflation propelled growth concerns and weighed on the USD.
• Market sentiment remains weak amid recession, inflation fears.
• Eurozone inflation, US ISM Manufacturing PMI for June will be important to watch for the day.

EUR/USD fails to extend the previous day’s corrective pullback from a fortnight low, easing around 1.0480-75 during Friday’s initial Asian session. The major currency pair benefited from the broad US dollar pullback on Thursday before retreating ahead of another round of important data points.

Softer US spending and inflation figures amplified recession concerns for the world’s largest economy and drowned the US dollar on Thursday. The greenback’s retreat could also be linked to the downbeat US Treasury yields as the benchmark 10-year bond coupons dropped below 3.0%, before bouncing off to 3.01% at the closing, to portray around 50 basis points (bps) of a fall from June’s peak.

It should be noted, however, that the equities couldn’t cheer downbeat Treasury yields, nor the softer US dollar, amid fears of economic slowdown.

That said, the US Dollar Index (DXY) reversed from a 12-day high to snap a two-day uptrend by closing the day around 104.75.

Talking about the data, On Thursday, the US Personal Income for May matched market forecasts and upwardly revised figures of 0.5% MoM but Personal Spending dropped to a three-month low, to 0.2% versus 0.5% expected and 0.6% downwardly revised previous readings. Further, the Personal Consumption Expenditure (PCE) Price Index reprinted 6.3% YoY figures for May.

More importantly, the Core PCE Price Index, the Fed’s preferred inflation gauge, matched expectations of 4.7% YoY versus 4.9% prior.

On the other hand, German Retail Sales for May dropped below -2.0% market forecast to -3.6% YoY, versus -0.4% previous readings whereas the Eurozone Unemployment Rate declined to 6.6% versus 6.8% expected and 6.7% prior.

Looking forward, the initial readings of the Eurozone key inflation gauge, Harmonised Index of Consumer Prices (HICP), will precede the US ISM Manufacturing PMI for June to direct short-term EUR/USD moves.

Technical analysis

A daily closing below the ascending trend line support from May 13, near 1.0440 by the press time, appears necessary for the EUR/USD bears to refresh the yearly low. Otherwise, a three-week-old resistance line, near 1.0565, could lure the counter-trend traders.