EUR/USD treads water above 1.1700 as USD ignores firmer Treasury yields

  • EUR/USD struggles for clear direction despite bouncing off intraday low.
  • Traders seek more clues to confirm US CPI-led support to Fed’s “transitory” inflation outlook.
  • Covid woes prevail, Biden rejects Republicans’ threat to debt ceiling talks.
  • EU Industrial Production, US PPI and Jobless Claims may offer fresh pulse.

EUR/USD regains 1.1740, off intraday low but unchanged on a day, heading into Thursday’s European session. The currency major pair struggles for clear direction as a light calendar in Asia and dead news feed probes the corrective pullback from the yearly bottom marked the previous day.

The US Dollar Index (DXY) remains pressured, down 0.03% around 92.88 by the press time, after taking a U-turn from the highest levels since April on Wednesday. While the greenback’s prior weakness could be linked to the US Consumer Price Index (CPI) data for July, as well as comments from the Fed policymakers, the latest pullback portrays the traders’ indecision amid mixed clues.

Even so, chatters that the US diplomats, including Treasury Secretary Janet Yellen, are up for meeting their Chinese counterparts, seem to favor the mild risk-on mood and weigh on the DXY. On the same line could be the news that the US Food & Drug Administration (FDA) braces for the third vaccine dose for immunocompromised people, per the NBC news.

Meanwhile, contrasting clues from the US and European policymakers over the challenges to economic recovery due to the Delta covid variant and future moves of the Fed and the ECB keeps the EUR/USD pair troubled after the latest inflation figures from the US and Germany.

Against this backdrop, S&P 500 Futures remain sluggish around the record top whereas the US 10-year Treasury yields regain 1.35% level, reversing the previous day’s fall.

Given the US dollar’s lack of reaction to the firmer Treasury yields and mildly upbeat fundamentals, EUR/USD traders will keep their eyes on the Eurozone Industrial Production for June, expected -0.2% versus -1.0% prior, ahead of the US Producer Price Index (PPI) data for July, market consensus backs no change in 5.6% YoY figures. Also important will be the weekly readings of the US Jobless Claims, likely to ease from 385K to 375K, after the strong NFP.

Above all, covid headlines and chatters concerning the US budget, as well as the stimulus package, will be important to follow for fresh direction.

It’s worth noting that the EUR/USD bears are likely tiring around the key support and hence any USD-negative catalysts will be welcomed with zeal.

Technical analysis

Although a five-week-old support line joins the yearly bottom to highlight the 1.1700 as the key support, a three-week-long resistance area near 1.1750-55 becomes the immediate hurdle ahead of a bit longer horizontal region, from July 13, around 1.1770, to challenge recovery.


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