EUR/USD lacks momentum, churns near 1.0750

• EUR/USD marked by congestion in the early trading week.
• Market-driving data limited to mid-tier until Friday.
• US consumer sentiment figures lie ahead, Fedspeak to drive flows.

EUR/USD cycled familiar levels again on Tuesday, testing the waters near 1.0750 as broader markets look for signals to push in either direction. Risk appetite was crimped on Tuesday after Fedspeak from key US Federal Reserve (Fed) officials threw caution on hopes for approaching rate cuts from the Fed, but rate markets are still betting on at least two cuts in 2024, with the first cut expected in September.

European Retail Sales recovered more than expected early Tuesday, with pan-European Retail Sales growth clocking in at 0.8% MoM in March, recovering from the previous month’s -0.3% (revised up slightly from the initial print of -0.5%). Still, Euro (EUR) bidders were hobbled, and EUR/USD flubbed a bullish push for 1.0790.

Fed's Kashkari: Fed will hold rates where they are if we need to

Fed officials hit market sentiment on Tuesday, cautioning that still-high inflation and a still-tight US labor market will cut Fed rate cut hopes off at the knees if price growth doesn’t start easing and slack doesn’t start appearing in jobs figures. Minneapolis Fed President Neel Kashkari specifically highlighted that the last Nonfarm Payrolls (NFP) report, while softer than expected, was still not exactly a soft print. The Fed’s Kashkari also cautioned that the Fed may be forced to hold rates where they are for much longer than market participants expect, and refused to rule out the possibility of further rate hikes in the future if inflation progress appears to have stalled, or reverses.

German Industrial Production will be the key data print for Wednesday’s upcoming European market session. A mid-tier data release, limited market reaction will be expected. Germany’s seasonally-adjusted Industrial Production for the month of March is expected to decline, forecast to print at -0.6% compared to the previous month’s 2.1%.

Data traders looking for impactful economic releases will need to wait until Friday’s University of Michigan US Consumer Sentiment Index. The UoM Consumer Sentiment Index is expected to tick down to 76.0 in May, down slightly from the previous 77.2.

EUR/USD technical outlook

EUR/USD is trading above a recent demand zone in the near-term, holding above 1.0750 despite limited momentum. The pair is holding above the 200-hour Exponential Moving Average (EMA) at 1.0732, but a tumble back into recent congestion near the 1.0700 handle remains on the cards if bidders fumble further.

Daily candles are hardening a technical rejection from the 200-day EMA at 1.0798, and EUR/USD is at risk of an extended backslide down to the last swing low near 1.0600.

EUR/USD hourly chart

EUR/USD daily chart