EUR/USD pares recent losses around 1.0900 with eyes on EU/US inflation, ECB Forum

• EUR/USD consolidates the biggest daily loss in five weeks, the first weekly on in four amid market’s cautious optimism.
• Weekend news from Russia, China allow Euro bears to take a breather.
• Inflation clues from Germany, Eurozone and US will be crucial to watch, central bankers’ speeches from ECB Forum eyed too.

EUR/USD prints mild gains around 1.0900 as it begins the trading week on a firmer footing after teasing bears in the last week. In doing so, the Euro pair pares the biggest daily loss in five weeks as the weekend headlines allow traders to take a sigh of relief after witnessing a risk-off mood in the last week. Also underpinning the major currency pair’s rebound could be the consolidation ahead of this week’s top-tier inflation data and central bankers’ speeches from the US and Europe.

Talking about the weekend news, doubts about Russian President Vladimir Putin’s power in Moscow and hopes of major stimulus from China allowed trades to witness cautious optimism on early Monday and weighed on the US Dollar.

“Heavily armed Russian mercenaries withdrew from the southern Russian city of Rostov under a deal that halted their rapid advance on Moscow but raised questions on Sunday about President Vladimir Putin's grip on power,” said Reuters in this regard.

On the other hand, Ning Jizhe, deputy head of the economic committee of the Chinese People's Political Consultative Conference (CPPCC) and a former vice head of the National Development and Reform Commission (NDRC) flagged concerns about sooner stimulus from China and allowed the EUR/USD to rebound, due to its business ties with Beijing. “China needs to step up measures as soon as possible to bolster a faltering post-COVID recovery in the world's second-largest economy,” said China’s Ning Jizhe per Reuters.

Even so, downbeat PMIs from Europe and Germany, versus not-so-disappointing activity data from the US, join the broad fears of recession to keep the EUR/USD bears hopeful.

On Friday, US S&P Global PMIs for June came in mixed as the Manufacturing PMI dropped to 46.3 from 48.4 prior, versus 48.5 expected, whereas the Services PMI improved to 54.1 from 54.0 expected despite being lesser than the 54.9 previous monthly figure. With this, the Composite PMI declined to 53.0 versus 54.4 market forecasts and 54.3 prior.

Following the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said, “Any further rate hikes will of course have a further dampening effect on this sector (services) which is especially susceptible to changes in borrowing costs." That said, Federal Reserve Bank of San Francisco President Mary Daly told Reuters on Friday that two more interest rate increases this year would be a "very reasonable projection."

At home, the preliminary readings of Germany’s HCOB PMIs for June were downbeat. That said, the Manufacturing gauge worsened to 41.0 versus 43.5 expected and 43.2 prior whereas Services PMI also dropped to 54.1 from 57.2 previous readings and 56.2 market forecasts. With this, the Composite PMI dropped to 50.8 from 53.9 prior and 53.5 analysts’ estimations. On the same line, Eurozone HCOB PMIs were also downbeat as the headlines Manufacturing PMI dropped to 43.6 from 44.8 expected and prior while the Services PMI dropped to 52.4 versus 54.5 market forecasts and 55.1 prior. Further, the Composite PMI declined to 50.3 compared to 52.5 expected and 52.8 prior.

While portraying the mood, S&P500 Futures rise 0.20% intraday near 4,400 despite witnessing a downbeat week for Wall Street and gains of the US Treasury bond yields.

Moving on, Eurozone’s preliminary inflation report for June and the US Core Personal Consumption and Expenditure (PCE) data will be crucial to watch for clear directions. Also important will be speeches of the top-tier central bankers at the European Central Bank (ECB) Forum, as well as the US Bank Stress Test results.

Also read: EUR/USD Weekly Forecast: Bulls hesitate as concerns arise

Technical analysis

Failure to provide a daily closing below the 50-DMA, around 1.0870 by the press time, joins the nearly oversold RSI (14) line to trigger the EUR/USD pair’s bounce towards the 10-DMA hurdle of 1.0920.