EUR/USD remains vulnerable to further downside past 1.0900 as yields, firmer US data favors Greenback

• EUR/USD struggles to defend corrective bounce off six-week low, sidelined of late.
• Unimpressive Eurozone statistics contrast with upbeat US data to weigh on Euro pair.
• Recently hawkish FOMC Minutes, improvement in US statistics challenge Fed policy pivot concerns and weigh on EUR/USD.
• Yields cheer hawkish Fed bias, market’s economic fears to keep the pair sellers hopeful amid mixed concerns about bloc.

EUR/USD lacks recovery momentum despite bouncing off the multi-day low as it seesaws around 1.0870-75 amid early hours of Friday’s Asian session, after refreshing the six-week low the previous day. In doing so, the Euro pair justifies the market’s risk-off mood, as well as the recently altered concerns about the Federal Reserve (Fed), to keep sellers on board.

The recently firmer US data contrasts with unimpressive Eurozone statistics and the looming concerns about German recession to keep the Euro bears hopeful. Also, the latest shift in the Fed bias joins the broad risk aversion wave to propel the yields and exert additional downside pressure on the EUR/USD pair, via firmer US Dollar.

That said, the US Dollar Index (DXY) refreshed two-month high the previous day before closing around 103.42 on Thursday.

Talking about the US data, US Philadelphia Fed Manufacturing Survey marked the strongest print since April 2022, as well as the first positive outcome in a year, while rising to 12.0 for August from -13.5 prior and -10.0 expected. On the same line, the US Initial Jobless Claims also edged lower to 239K for the week ended on August 11 versus a revised up 250K prior and the market expectations of 240K. It should be noted that the four-week average of the Initial Jobless Claims and the weekly figures of the Continuing Claims for the period ended on August 04 edged higher. Earlier in the week, the US Industrial Production and Retail Sales for July marked surprised growth but the housing numbers were mixed.

Additionally, the latest Fed Minutes showed that the most policymakers preferred supporting the battle again the ‘sticky’ inflation, despite being divided on the imminent rate hike, which in turn challenges the market’s previous policy pivot concerns about the US central bank and favor the Greenback.

At home, Eurozone trade surplus improved on seasonally adjusted (s.a) and non-seasonally adjusted (n.s.a) for June. That said, the former grew to €12.5B while the latter rose to €23B versus €0.2B and €-0.3B respective priors. Earlier in the week, Eurozone Industrial Production marked a surprise growth for June but the second readings of the Eurozone Gross Domestic Product (GDP) for the second quarter (Q2) confirmed initial forecasts whereas the Employment Change eased for the said period.

It’s worth noting that China’s second-large realtor, as well as the world's most heavily indebted property developer, Evergrande filed for protection from creditors in a US bankruptcy court on Thursday, per Reuters. The same escalate fears surrounding the world’s second-largest economy, as well as the global economic transition, as it battles with the slowing economic recovery and concerns about the financial health of China’s biggest realtor, namely Country Garden, propel market woes of late. The same joins the hawkish Fed bias to propel the yields and the US Dollar.

Looking ahead, the final readings of Eurozone inflation data will entertain EUR/USD traders while the bond market moves and risk catalysts gain major attention.

Technical analysis

Failure to cross the 1.0935-30 resistance confluence comprising the 100-DMA and a one-month-old falling trend line, despite the latest corrective bounce, keeps the EUR/USD bears hopeful of witnessing further downside of the pair. The same highlights July’s low of 1.0833 as an immediate support.