EUR/USD flirts with weekly low near 1.0850, Eurozone Retail Sales, US employment/PMI data eyed

• EUR/USD rebounds from intraday/weekly low but struggles to gain upside momentum.
• 50-DMA break, hawkish Fed Minutes and risk-off mood together weighs on the Euro pair.
• Softer US data prods sellers ahead of mid-tier Eurozone, United States data.
• Headlines about China, recession will also be important for fresh impulse.

EUR/USD picks up bids to consolidate recent losses around the weekly low as it bounces off 1.0842 to 1.0850 amid very early Thursday morning in Europe. In doing so, the Euro pair prepares for the top-tier statistics from Eurozone and the United States.

That said, the market’s preparations for Thursday’s Eurozone Retail Sales for May, US ADP Employment Change for June and the US ISM Services PMI for June appear to recently trigger the EUR/USD pair’s corrective bounce. Adding strength to the rebound could be the softer US data and a cautious mood ahead of the key catalysts. That said, US Factory Orders reprints 0.3% MoM growth for May versus 0.8% expected. The official publication also mentioned that the new orders for manufactured durable goods in May rose for the third consecutive month. Earlier in the week, the US ISM Manufacturing PMI and S&P Manufacturing PMI came in softer and weighed on the US Dollar Index.

It’s worth observing that the hawkish Federal Reserve (Fed) Meeting Minutes join mixed comments from the European Central Bank (ECB) officials and the risk-negative catalysts to weigh on the EUR/USD price.

On Wednesday, European Central Bank (ECB) policymaker and Bundesbank Chief Joachim Nagel said, “interest rates must rise further,” adding that it is “too early to say how far.” On the same line, German Chancellor Olaf Scholz said on Wednesday, “We cannot carry on with 0% interest rates,” and noted that they support the European Central Bank (ECB) in its battle against inflation, as reported by Reuters.

Alternatively, ECB policymaker Ignazio Visco stated, “More rate hikes are not the only way to curb inflation.”

It should be noted that the ECB’s latest monthly survey of consumer expectations for inflation suggests that inflation expectations among Eurozone consumers decreased further in May for the next year, but remained unchanged for upcoming three years.

Talking about the data, the Eurozone Producer Price Index (PPI) declines to -1.5% YoY for May versus -1.3% expected and 0.9% prior (revised) whereas the monthly readings came in as -1.9% for the said month compared to -1.8% expected and -3.2% previous readings.

Further, the final readings of Eurozone and German HCOB Composite PMIs for June ease to 50.6 and 49.9 versus 50.8 and 50.3 initial forecasts respectively. Further, the HCOB Services PMIs appear less worrisome as it matches the flash predictions of 54.1 for Germany but drops to 52.0 from 52.4 preliminary expectations.

On the other hand, a jump in Chinese investor buying Hong Kong and Macau wealth products join pessimism about China’s top-tier housing players like Shimao Group, as well as the government-backed Sino-Ocean Group, to amplify economic fears about the world’s biggest industrial player China.

Further, downbeat prints of China’s Caixin Services PMI for June, to 53.9 versus 57.1 prior, joined the escalating fears of the US-China tussle amid fresh warnings of further trade restrictions from Beijing to weigh on the sentiment and fuel the DXY.

That said, China’s Global Times and former Vice Commerce Minister flagged hardships for the US IT companies, as well as metal players. Earlier on Wednesday, China announced abrupt controls on exports of some gallium and germanium products, effective from August 1. The dragon nation’s latest retaliation is in reaction to the US curb on AI chips’ shipments to Beijing.

Amid these plays, the markets almost priced in the July Fed rate hike by 0.25% and propel the US Dollar Index while the Wall Street benchmarks closed in the red and the US Treasury bond yields jumped. It should be noted that the S&P500 Futures print mild losses whereas the US 10-year and two-year Treasury bond yields refresh a three-month high at the latest.

Looking forward, today’s US ISM Services PMI and ADP Employment Change for June, as well as China headlines and recession woes, will be crucial for clear directions of the EUR/USD. Additionally, a likely deterioration in the Eurozone Retail Sales for May should also be watched carefully for clear directions.

Technical analysis

A daily closing beneath the 1.0865 key support, now immediate resistance comprising the 50-DMA and 38.2% Fibonacci retracement of January-April upside, keeps EUR/USD sellers hopeful. However, a convergence of the 100-DMA and a fortnight-old descending trend line, around 1.0825 by the press time, appears a tough nut to crack for the Euro bears.