EURUSD Price clings to the 1.000 parity level with eyes on US Retail Sales

• EURUSD Price struggles to extend corrective pullback from a two-decade low.
• Easing hawkish Fed bets, mixed comments from policymakers allowed bears to take a breather ahead of blackout period.
• US Retail Sales will be important, Fed speakers may also try to use force before pre-meeting silence.

EURUSD Price seesaws around 1.0020 after bouncing off the lowest levels since December 2002, near 0.9950, as traders seek fresh clues during Friday’s Asian session. The major currency pair’s latest rebound also marks the traders’ indecision, as well as chances of a rebound amid recently mixed signals.

The mixed comments from the Fed speakers who tried to talk down the odds of the 100 bps rate hike are the key catalyst to triggering the EURUSD Price recovery. On the same line was the CME’s FedWatch tool that showed receding probabilities favoring the 75 basis points (bps) of Fed rate hike during July. Additionally, the receding difference between the 2-year and the 10-year US Treasury yields also helped ease the EURUSD trader’s pain of late.

Also read: EUR/USD Forecast: Battle around parity continues, bulls to be disappointed

EURUSD Price bounced on Fedspeak

Fedspeak talked down 100-bps rate hike.

Receding hawkish bias of the Fed policymakers, known as Fedspeak, appears to have recently tamed the risk-aversion wave. Among the key hurdles for the hawks were comments from St. Louis Federal Reserve President James Bullard and Federal Reserve Governor Christopher Waller. That said, Fed’s Bullard said, "So far, we've framed this mostly as 50 versus 75 at this meeting." On the same line, Fed’s Waller mentioned that markets may have gotten ahead of themselves by pricing a 100 basis points rate hike in July, as reported by Reuters.

Yield curve inversion also favored bulls

It’s worth noting that a reduction in the US Treasury yield curve inversion also underpinned the EURUSD Price recovery from the 20-year low. That said, the US 10-year Treasury yields ended Thursday around 2.95%, up 0.95% intraday, whereas the 2-year bond coupon dropped 0.75% to 3.12% at the latest. With this, the difference between the near-term and the longer-term bond coupons eased, which in turn allowed EURUSD bears to step back, mainly due to the reduction in the recession fears that initially favored the US dollar bulls.

Hawkish Fed forecasts eased as well

Markets curtailed bets for the heavier Fed rate hikes in the July meeting, after witnessing a reduction in the hawkish calls from the Fed policymakers and mixed performance of the yields. That said, the latest print from the CME’s FedWatch tool suggests nearly 52% chance of a 75 bps rate hike in July versus showing an almost certain case for the said rate lift the previous day.

US data keep EURUSD bears hopeful

Despite the recently mixed catalysts, firmer US data favored the EURUSD bears to remain hopeful of refreshing the multi-year low. On Thursday, the US Bureau of Labor Statistics mentioned that the Producer Price Index (PPI) for final demand in the US climbed to 11.3% on a yearly basis in June from 10.9% in May. This print surpassed the market expectation of 10.7%. Additionally, there were 244,000 Initial Jobless Claims in the week ending July 9 versus the previous week's print of 235,000 and market expectation of 235,000. The Weekly Jobless Claims were the highest in five months and raised market fears of the start of the recession.

Downbeat EU projections weigh on quote

Pessimistic economic forecasts from the European Commission also drown the EURUSD Price. As per the latest quarterly EU projections, published the previous day, EU Commission expects GDP growth of 2.6% in the euro area in 2022, down from 2.7% in the previous outlook. The predictions also expect euro area inflation of 7.6% in 2022, up from 6.1% prior forecast.

US Retail Sales is the key

Given the recently firmer US inflation data and mixed Fedspeak, today’s US Retail Sales will be crucial for EURUSD traders. Market forecasts suggest that the US Retail Sales could rise to 0.8% MoM in June from -0.3% marked in May. In this regard, analysts at the Australia and New Zealand Banking Group said, “A strong retail sales number would be illustrative of strong demand and the need for the FOMC to maintain, and possibly intensify, its hawkish guidance.”

EURUSD Price technical outlook

EURUSD Price remains inside the monthly bearish channel despite bouncing off the 61.8% Fibonacci Expansion (FE) of March-May 2022 moves, around 0.9950.

Even if the major currency pair manages to cross the resistance line of the aforementioned descending trend channel, around 1.0055 by the press time, the 50-SMA level of 1.0140 could test the EURUSD buyers before directing them to the last Friday’s peak of 1.0190.

It’s worth noting that the bearish bias needs validation from the monthly high near 1.0475 to push back the EURUSD sellers.

Alternatively, the 61.8% FE level near 0.9950 and the December 2002 low surrounding 0.9860 appear the immediate support levels to watch during the pair’s fresh downside.

Following that, the oversold RSI (14) and the lower line of the stated channel, near 0.9825, will be important to watch.

Overall, EURUSD is likely to witness a further rebound but the trend reversal is far.

Elliott Wave view: Bearish trend in EUR/USD remains intact