EUR/USD sticks to gains above 1.0600, lacks bullish conviction ahead of US PCE data

• EUR/USD regains some positive traction on Friday amid the emergence of fresh USD selling.
• A modest recovery in the risk sentiment is seen undermining demand for the safe-haven buck.
• Hawkish Fed expectations to limit the USD losses and cap the pair ahead of the US PCE data.

The EUR/USD pair continues to show some resilience below the 1.0600 mark and attracts some dip-buying on the last trading day of the week. Spot prices move away from over a one-week low touched on Thursday and climb to the 1.0620-1.0625 area, a fresh daily high during the early European session.

The US Dollar struggles to capitalize on the previous day's upbeat US macro data-inspired intraday move up and meets with a fresh supply on Friday. A modest recovery in the US equity futures undermines the safe-haven buck, which, in turn, is seen lending support to the EUR/USD pair. That said, a combination of factors should help limit any deeper USD losses and cap the upside for the major, at least for the time being.

Investors remain worried about the economic headwinds stemming from a surge in COVID-19 cases in China.  Apart from this, geopolitical risks have been fueling recession fears, which could drive some haven flows towards the greenback. In fact, Russia said on Wednesday that there is no chance of peace talks and that the continued arms supplies by Western allies to Ukraine would lead to a deepening of the ongoing conflict.

Furthermore, North Korea reportedly fired a ballistic missile towards the sea off its east coast on Friday. This, along with renewed speculations that the Fed will stick to its ultra-hawkish policy stance to tame inflation, favours the USD bulls and warrants caution before placing bullish bets around the EUR/USD pair. In fact, the upbeat US macroeconomic data released on Thursday lift bets for higher rates for a longer period.

The aforementioned fundamental backdrop, along with the range-bound price action witnessed over the past week or so, should hold back traders from positioning for a firm near-term direction. Investors might also prefer to wait for the US Core PCE Price Index, the Fed's preferred inflation gauge, due later during the early North American session.

Technical levels to watch