EURUSD struggles to defend 1.0000 level ahead of Eurozone Retail Sales, US inflation

• EURUSD keeps two-day uptrend near a weekly high, sidelined of late.
• Risk-on mood, hawkish ECBspeak and firmer EU data underpin bullish bias amid a light calendar.
• Chatters surrounding US Mid-Term elections, nearness to Fed’s pivot also favored buyers.
• Eurozone Retail Sales for September will be important for the day, US inflation is the key.

EURUSD retreats to 1.0015 during Tuesday’s Asian session as bulls take a breather following a sharp run-up in the last two days. Even so, the bulls keep the reins ahead of Eurozone Retail Sales, as well as the US Consumer Price Index (CPI) for October.

Firmer sentiment joined upbeat EU data and hawkish comments from the European Central Bank (ECB) officials to favor the EURUSD buyers. On the same line were talks surrounding the Federal Reserve’s (Fed) pivot point and the Republicans’ victory in the US Midterm Elections.

Germany’s Industrial Production offered a positive surprise of 0.6% MoM during September versus -0.8% expected and downwardly revised prior of -1.2%. Further, the Eurozone Sentix Investor Confidence index improved to -30.9 in November from -38.3 in October versus -35.0 expected. The index rebounded from its lowest level since March 2020.

Elsewhere, “As long as underlying inflation has not peaked, we shouldn’t stop rate hikes,” the European Central Bank (ECB) Governing Council member and French central bank governor Francois Villeroy de Galhau said in an interview with the Irish Times on Monday. It should be noted that European Union (EU) economic commissioner Paolo Gentiloni mentioned that the bloc’s economy will shrink in the coming months due to the energy crisis and high inflation. Additionally, the EU Commission Executive and Vice President Valdis Dombrovskis signaled the updated economic forecasts for the EU would show a further weakening of the economy and high levels of inflation.

On the other hand, Friday’s mixed US employment data and recently downbeat comments from the Fed policymakers suggested that the US central bank is near the pivot and may ease on the rate hike trajectory.

Talking about the US Midterm Elections, the Australia and New Zealand Banking Group (ANZ) said, “Recent polling indicates that the Republicans will take control of the House of Representatives, with control of the Senate going down to the wire. Markets are expected to react positively to Republican control because even controlling one house would limit fiscal spending. Additional fiscal spending has the potential to undermine tighter monetary policy and therefore is considered a market risk.”

Amid these plays, Wall Street closed with gains and the US Treasury yields were firmer too. However, the US Dollar Index (DXY) remained pressured.

Moving on, the aforementioned risk catalysts could entertain the EURUSD traders and the covid fears, from China, might allow the bulls to take a breather. However, major attention will be given to the Eurozone Retail Sales, expected -1.3% YoY versus -2.0% prior. Should the scheduled data improve, the major currency pair can extend the latest rebound to cross the key 100-DMA hurdle. Following that, the US inflation data will be the key amid the downbeat Fedspeak.

Technical analysis

Unless providing a daily closing below the 50-DMA support near 0.9880, EURUSD bulls are all set to cross the 100-DMA hurdle surrounding 1.0045.