EUR/USD retreats from fortnight high near 1.0600 on recession/inflation fears, ECBSpeak eyed

  • EUR/USD bulls take a breather around two-week high, pauses two-day uptrend.
  • US dollar recovers on fresh fears of inflation/recession emanating from the US data.
  • Headlines Russia surrounding, anxiety ahead of ECB Forum adds strength to the risk-off mood.
  • US CB Consumer Confidence, comments from ECB policymakers eyed for intraday directions.

EUR/USD holds onto the pullback from a two-week high as bulls get rejections from short-term key resistances, as well as a risk-off mood, during Tuesday’s Asian session. That said, the major currency pair remains pressured around 1.0585 by the press time, after reversing from a fortnight top before a few hours.

The quote managed to extend Friday’s recovery moves amid, cautious optimism in the markets considering mixed US data and optimism ahead of this week’s key European Central Bank (ECB) Forum. However, challenges to risk appetite emanated from the headlines surrounding Russia and China, which later on joined upbeat US economics to weigh on the sentiment and exerted fresh downside pressure on the EUR/USD.

Russia rejects default on paying external debt by saying Euroclear not accepting Russia’s euro bond transaction ‘is not our problem’. “Russian gold and forex reserves are prohibitedly blocked. Russia made payment on euro bond coupons in May,” adds Kremlin in a statement.

Recently, global rating agency Moody’s mentioned that Russia’s failure to make its coupon payment results in a default. Additionally, former Russian President Dmitry Medvedev also crossed wires, via Reuters, while saying, “Any attempt by a NATO nation to encroach upon Crimea constitutes a declaration of war against Russia and may trigger the outbreak of world war III.”

Elsewhere, US Durable Goods Orders rose to 0.7% in May, versus 0.1% expected and 0.4% prior. That said, the widely tracked Nondefense Capital Goods Orders ex Aircraft also cross 0.3% market forecasts and previous readings to increase by 0.5% during the stated month. Further, the US Pending Home Sales also surprised the USD bulls with 0.7% MoM figures for May versus -3.7% expected and -4.0% prior. The YoY figures, however, came in negative to -13.6% versus -9.8% prior. Further, Dallas Fed Manufacturing Business Index for June dropped to the lowest level since May 2020, to -17.7 versus -3.1 forecasts and -7.3 prior.

Amid these plays, Wall Street closed in the red, after an upbeat start, whereas the US 10-year Treasury yields nearly seven basis points (bps) to end Monday at around 3.20%.

Moving on, US CB Consumer Confidence for June, prior to 106.4, will join the ECB policymakers’ comments, including President Christine Lagarde, to entertain EUR/USD traders.

Technical analysis

EUR/USD battles the 21-DMA hurdle around 1.0585 following a failure to cross a four-month-old descending resistance line, at 1.0161 by the press time. Also acting as an upside hurdle is the 1.0640-45 horizontal area comprising multiple level marked since early March. That said, the gradual recovery of the RSI (14) line hints at the EUR/USD pair’s further upside.

Meanwhile, pullback moves remain elusive until breaking a two-week-old support line near 1.0545.

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