EUR/USD fades bounce off five-year low around 1.0400, EC Growth Forecasts eyed

• EUR/USD seesaws in a tight range after bouncing off 2017 lows.
• Inflation, economic fears regain market attention as risk-on mood loses traction amid the quiet Asian session.
• US data, ECB hawks joined Powell’s 50 bps comments to trigger corrective pullback around multi-day low.
• Eurozone economic forecasts will be important amid impending geopolitical woes in the region.

EUR/USD fails to extend the previous day’s corrective pullback from the lowest levels since 2017, taking rounds to 1.0400 during a quiet Asian session on Monday.

The major currency pair’s bounced off the multi-month lows the previous day as firmer sentiment joined downbeat US data and Fedspeak. Also favoring the EUR/USD rebound were recently upbeat comments from the European Central Bank (ECB) policymakers. However, renewed fears of economic growth and inflation, as well as a cautious mood ahead of the European Commission’s (EC) quarterly economic forecasts, seem to probe the pair buyer of late.

Downbeat prints of the US Michigan Consumer Sentiment Index for May backed Fed Chair Jerome Powell’s repetition of 50 bps rate hikes concerns and pulled the US Dollar Index (DXY) back from a 20-year high the previous day. Also challenging the greenback gauge was cautious optimism in China and hopes of de-escalation of the geopolitical crisis surrounding Russia and Ukraine. Furthermore, the ECB policymakers’ July rate hike chatters also underpinned the Euro strength and helped EUR/USD to rebound from the multi-month low.

However, the latest headlines suggest Germany’s firmer view of banning oil imports from Russia, as well as worsening military actions in Donbas, weigh on the risk appetite and the EUR/USD prices.

Amid these plays, S&P 500 Futures print mild gains while the US 10-year Treasury yields stay mostly unchanged at around 2.94%. That said, Wall Street benchmarks portrayed the biggest daily gains in over a week whereas the US Treasury yields also recovered on Friday.

Moving on, quarterly inflation and growth forecasts from the European Commission will be crucial to watch for EUR/USD prices are traders await more clues on the bloc’s economic conditions amid the ongoing Russia-Ukraine war, as well as chatters of July rate hike.

Technical analysis

Although oversold RSI conditions signal further recovery moves toward a three-week-old resistance line near 1.0500, any further upside appears difficult but may challenge the monthly peak of 1.0641 on crossing the immediate hurdle.

Meanwhile, the 1.0350-40 support zone, comprising the recent low and the year 2017 bottom, puts a strong floor under the EUR/USD prices.