EUR/USD clings to 1.0900, portrays market’s anxiety ahead of mid-tier EU/US data, FOMC Minutes

• EUR/USD stays sidelined near monthly low, keeping Tuesday’s inaction amid cautious mood.
• Mixed concerns about Europe, US and China prod Euro pair as the key weekly event looms.
• Economic slowdown fears, firmer yields join upbeat German, US statistics to prod momentum traders.
• Second estimates of Eurozone Q2 GDP, employment data and monthly Industrial Production will entertain traders ahead of Fed Minutes.

EUR/USD treads water around 1.0900 as it repeats the previous day’s inaction at the lowest levels in five weeks amid early Wednesday morning in Europe.

The Euro pair’s latest inaction could be linked to the market’s cautious mood ahead of a slew of second-tier economics from the Eurozone and the US. Also likely to prod the EUR/USD traders is the mixed bias about China-linked risk aversion and the US Dollar’s latest retreat.

That said, the US Dollar Index (DXY) seesaws around 103.20 as it prods a five-month-old descending resistance line at the highest level in a month. In doing so, the Greenback’s gauge versus the six major currencies traces the latest pullback in the US 10-year Treasury bond yields from the yearly top to 4.20%. However, the US stock futures and equities in the Asia-Pacific zone appear dull and restrict the EUR/USD moves.

On Tuesday, Germany’s ZEW Economic Sentiment improved to -12.3 for August versus -14.4 expected and -14.7 prior but the Current Situation gauge dropped to -71.3 from -59.5 previous readings and -63.0 market forecasts. That said, the Eurozone ZEW Economic Sentiment also recovered to -5.5 from the analysts’ estimations of -12.0 and -12.2 prior. Not only the data but the official statement from the ZEW Institute also appeared optimistic as it said, “Respondents, by and large, do not anticipate any further interest rate hikes in the eurozone and the United States and the economic outlook for the USA has seen a significant increase – these factors contribute to the improved expectations for Germany.”

Alternatively, China’s downbeat statistics for July joined the People’s Bank of China’s (PBoC) surprise rate cuts and looming credit rating downgrade of the major US companies to weigh on the sentiment and the EUR/USD prices.

Further, upbeat US data and the hawkish Fed talks also weigh on the Euro prices. That said, the US Retail Sales grew 0.7% MoM in July versus 0.4% expected and 0.3% reported in June (revised from 0.2%). The details suggested that the Core Retail Sales, namely the Retail Sales ex Autos, grew 1.0% versus 0.4% market forecasts whereas the Retail Sales Control Group doubled from 0.5% previous readouts (revised from 0.6%) to 1.0% for the said month. Further, the US NY Empire State Manufacturing Index slumped to -19.0 from 1.1 prior and -1.0 market forecasts while the US Export Price Index and Import Price Index improved on MoM in July but edged lower on a yearly basis for the said month.

Late Wednesday, Minneapolis Federal Reserve President Neel Kashkari ruled out talks of policy pivot by citing hot inflation and the uncertainty about the Fed’s progress in taming the same. The policymaker also said that he is not ready to say that the Fed is done raising rates, per Reuters.

Looking ahead, a likely improvement in the Eurozone statistics may allow the Euro pair to push back the bearish bias ahead of the Fed Minutes. Should the FOMC members show readiness for a rate hike before the policy pivot, the EUR/USD won’t hesitate to decline further.

Technical analysis

Tuesday’s Doji candlestick joins the nearly oversold RSI (14) line to prod the EUR/USD bears above the seven-week-old horizontal support region around 1.0845–35. That said, the bearish MACD signals and the quote’s sustained trading below the 100-DMA, as well as a one-month-old falling trend line, around 1.0935–30 of late, joins the early month’s downside break of an ascending trend line from late May to keep the sellers hopeful.