EUR/USD grinds near 1.0600 with eyes on Fed’s favorite inflation, US Durable Goods Orders

• EUR/USD remains sidelined around intraday high during the first profit-making day in three.
• China-linked headlines, holiday mood allow traders to pare recent losses ahead of the key US data.
• Market sentiment remains divided as hawkish Fed bets jostle with cautious optimism over economic transition.
• Bears need strong prints of US PCE Price Index, Durable Goods Orders to retake control as ECB hawks defend buyers.

EUR/USD clings to mild gains near 1.0610 as the pair buyers retake control after a two-day losing streak. That said, the major currency pair’s latest inaction could be linked to the market’s cautious mood, as well as the holiday season, during early Friday in Europe.

Talking about the positives, optimism over China’s pro-growth policies and the People’s Bank of China’s (PBOC) biggest weekly cash injection in two months seems to underpin the mildly positive sentiment of late. The same joins the chatters surrounding Evergrande’s nearness to an offshore debt restructuring plan to underpin the firmer sentiment.

Alternatively, strong US data and hawkish Fed bets join a rally in Shanghai’s hospitalization and challenge to China’s medical system, due to the latest easing of the Zero-Covid policy, to tease the risk aversion and weigh on the EUR/USD price.

That said, traders’ wait for the key US data and holiday season restrict the market’s immediate moves and restrict the EUR/USD moves. That said, the US Core Personal Consumption Expenditure (PCE) - Price Index and the Durable Goods Orders for November are crucial for short-term directions. As per the market consensus, the US Core PCE Price Index, also known as the Fed’s preferred inflation gauge, remains unchanged at 0.2% MoM. However, the Annualized forecasts suggest softer figures of 4.7% YoY versus 5.0% previous readings. Further, US Durable Goods Orders could register a contraction of 0.6% in November compared to the previous increase of 1.1% (revised from 1.0%).

Additionally, fears surrounding European economic growth, due to the geopolitical tension with Russia and the oil prices cap, as well as the comments from the European Central Bank (ECB) should be watched carefully for clear directions.

Technical analysis

A three-week-old horizontal support line, close to 1.0580, restricts short-term EUR/USD downside amid sluggish MACD and RSI (14). The recovery moves, however, need validation from a one-week-old descending resistance line, close to 1.0650.