EUR/USD rebound fades below 1.1100 as bloc’s economic woes jostle with US Dollar retreat

• EUR/USD struggles to defend the first daily gains in five at the lowest level in two weeks.
• China-inspired risk-on mood, mixed concerns about Fed prod US Dollar bulls at multi-day high.
• Euro bulls appear defensive as disappointing PMIs from Eurozone, Germany flag recession fears and push back ECB hawks.
• German IFO sentiment data, US CB Consumer Confidence can entertain EUR/USD traders but ECB vs. Fed drama is the key.

EUR/USD lacks upside momentum despite bouncing off a two-week low, mildly bid near 1.1075 heading into Tuesday’s European session. In doing so, the Euro pair benefits from the US Dollar’s retreat but hesitates in welcoming the pair buyers amid fears of a recession in the bloc.

US Dollar Index (DXY) retreats from a two-week high after cheering the comparatively better PMIs the previous day, down 0.08% intraday near 101.25 at the latest. With this, the greenback’s gauge versus the six major currencies bears the burden of China-inspired optimism, as well as doubt on the Federal Reserve’s (Fed) moves past July.

That said, headlines fueling hopes of China stimulus and bank intervention from Beijing seem to underpin the latest optimism. On the other hand, the US PMIs were better than their Western counterparts but weren’t impressive enough to keep the Fed on a rate hike trajectory after July’s widely anticipated 0.25% increase in the interest rates.

It should be observed that the first readings of the Eurozone and Germany slumped to the lowest levels since 2020 and reduced the room for the European Central Bank (ECB) to sound hawkish amid looming fears of witnessing a hard landing. As a result, the Euro bulls struggle to cheer the US Dollar’s retreat.

Against this backdrop, the S&P500 Futures remain sidelined near 4,580, struggling to extend the previous day’s recovery, whereas the US 10-year and two-year Treasury bond yields retreat from the highest levels in two weeks to 3.86% and 4.84% in that order.

Moving on, the ECB Bank Lending Survey and Germany’s IFO poll details will precede the US CB Consumer Confidence for July, expected 112.1 versus 109.70 prior, to direct intraday moves. However, major attention will be given to the monetary policy meeting of the Fed and the ECB, as well as clues for the same.

Technical analysis

Providing a sustained break of an ascending resistance line stretched from February, around 1.1150 by the press time, EUR/USD remains on the way to testing the previous monthly low of around 1.1015.