EUR/USD pares recent losses above 1.1000 amid mixed ECB, Fed talks, Eurozone inflation, US NFP eyed

• EUR/USD defends Friday’s corrective bounce off three-week low with mild intraday gains.
• Weekend statements from ECB’s Lagarde, Fed’s Kashkari allow Euro to extend previous corrective bounce.
• Softer US inflation pressure, fears about September rate hike prod EUR/USD bears.
• Euro buyers need validation from preliminary readings of Eurozone inflation data for July, Q2 GDP and US employment numbers.

EUR/USD picks up bids to consolidate the two-week losses amid Monday’s early Asian session, mildly positive near 1.1025 by the press time. In doing so, the Euro pair justifies the latest comments from European Central Bank (ECB) officials, as well as the Federal Reserve (Fed) policymakers, while extending the previous day’s rebound from the multi-day low, mainly backed by softer US data.

ECB President Christine Lagarde termed the latest economic output numbers from France, Germany and Spain as “quite encouraging” while speaking to French daily Le Figaro during the weekend. On Friday, Germany's Bundesbank President and ECB Governing Council member Joachim Nagel cited stubborn core inflation to defend the hawkish ECB policies while suggesting higher interest rates for longer.

Alternatively, Federal Reserve Bank of Minneapolis President Neel Kashkari flagged fears of job losses and slower growth while praising the inflation outlook. The policymaker also criticized the central bank’s aggressive monetary tightening campaign to tamp down price surges.

Meanwhile, headlines suggesting more stimulus from China also exert downside pressure on the US Dollar and allow the EUR/USD pair to consolidate the latest losses as it dropped in the last two consecutive weeks despite bouncing off a three-week low on Friday.

Friday’s EUR/USD rebound could be linked to softer prints of the US Federal Reserve’s (Fed) favorite inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, as it eased to 4.1% YoY for June versus 4.2% expected and 4.6% prior. Further details revealed that the Personal Income softened to 0.3% versus 0.5% expected and previous readings whereas the Personal Spending rose 0.5% from 0.4% market forecasts and 0.1% prior. Additionally, the final readings of the Michigan Consumer Sentiment Index for July eased to 71.6 from the initial estimations of 72.6 while the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations also edged lower to 3.0% from 3.1% expected and prior.

It should be noted that a slew of European Central Bank (ECB) Officials crossed wires on Friday while suggesting a lack of hawkish bias among them. That said, Governing Council member Gediminas Šimkus said, “We are close to a peak or at the peak,” whereas policymaker Peter Kazimir signaled that they are nearing completion of monetary policy tightening. ECB’s Šimkus, however, also added, “Even if we were to take a break in September, it would be premature to consider it the end.” On the other hand, policymaker Boštjan Vasle said that the September meeting could bring a hike or a pause while policymaker Madis Muller mentioned that the ECB decisions are no longer obvious at the current rate level.

That said, strong prints of the US Gross Domestic Product (GDP) Annualized for the second quarter (Q2) joined the upbeat figures of the US Durable Goods Orders for June to allow the US Dollar to stay firmer for the second consecutive week. Also likely to have favored the US Dollar, as well as weighed on the EUR/USD price, is the European Central Bank’s (ECB) dovish hike and emphasis on the data-dependency of the next rate decision.

Looking ahead, German Retail Sales and the first readings of the Eurozone inflation data for July, per the Harmonized Index of Consumer Prices, as well as the second-quarter (Q2) seasonally adjusted Gross Domestic Product for the bloc, will entertain the EUR/USD pair traders. However, major attention will be given to the United States ISM PMI and Nonfarm Payrolls (NFP) data for July for clear directions. Should the Eurozone inflation and growth numbers pick up, the Euro pair can extend the latest recovery.

Also read: EUR/USD Weekly Forecast: Euro vulnerable after ECB and stronger US data

Technical analysis

A convergence of the 10-DMA and the 21-DMA restricts the immediate upside of the EUR/USD pair near 1.1065-70. It’s worth noting, however, that the Euro pair remains off the bear’s radar unless providing a daily close beneath the two-month-old rising support line, close to 1.0975 by the press time. That said, MACD and RSI indicators do suggest the pair’s continuation of the southward grind.