- EURUSD price is struggling to extend the corrective pullback from a two-decade low.
- Easing of hawkish bets from the Fed, mixed comments from policymakers allowed the bears to take a breather ahead of the blackout period.
- US retail sales will be strong, Fed speakers may also try to use force before the silence before the meeting.
EURUSD price is hovering around 1.0020 after bouncing off the lowest levels since December 2002 near 0.9950 as traders look for fresh clues during Friday’s Asian session. The major currency pair’s latest rebound also marks traders’ indecision, as well as the chances of a rebound amid mixed signals recently.
Mixed comments from Fed commentators who tried to reduce the chances of a 100 basis point rate hike are the main catalyst for triggering the EURUSD price rally. Along the same line, the CME’s FedWatch tool showed lower odds favoring the 75 basis points (bps) Fed rate hike in July. Additionally, the pullback difference between the 2-year and 10-year US Treasury yields has also helped ease the EURUSD trader’s pain lately.
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EURUSD price bounced off Fedspeak
Fedspeak announced a rate hike of 100 basis points.
The decline in the hawkish bias of Fed policymakers, known as the fedspeak, seems to have recently brought the wave of risk aversion under control. Among the main hurdles for the hawks were comments from St. Louis Federal Reserve Chairman James Bullard and Federal Reserve Governor Christopher Waller. That said, the Fed’s Bullard said, “So far we’ve defined that primarily as 50 to 75 at this meeting.” Along the same lines, the Fed’s Waller mentioned that markets may have gotten ahead in pricing in a 100 basis point rate hike in July, as reported by Reuters.
The inverted yield curve also favored the bulls
It should be noted that a reduction in the US Treasury Yield Curve Inversion also supported the EURUSD price recovery from the 20-year low. That said, 10-year US Treasury yields ended Thursday around 2.95%, up 0.95% intraday, while the 2-year bond coupon fell 0.75% to 3.12. % at the latest. Thus, the difference between short-term and longer-term bond coupons has narrowed, allowing EURUSD bears to pull back, mainly due to the reduction in recession fears that initially favored the bulls. of the US dollar.
The Fed’s Hawkish forecast has also eased
Markets reduced bets for larger Fed rate hikes at the July meeting, after seeing a reduction in hawkish calls from Fed policymakers and a mixed yield performance. That said, the latest printout from the CME’s FedWatch tool suggests nearly a 52% chance of a 75 basis point rate hike in July compared to an almost certain case for said rate hike the previous day.
US data keeps EURUSD bullish
Despite newly mixed catalysts, firmer US Data Supported EURUSD Declines keep hoping to refresh the multi-year low. On Thursday, the US Bureau of Labor Statistics reported that the producer price index (PPI) for final demand in the US rose to 11.3% on an annual basis in June, from 10.9% in May. This impression exceeded market expectations by 10.7%. Additionally, there were 244,000 initial jobless claims in the week ending July 9 compared to 235,000 the previous week and a market expectation of 235,000. Weekly claims for unemployment insurance were the highest high in five months and led the market to fear the onset of a recession.
Worst EU projections weigh on the listing
European Commission’s pessimistic economic forecasts also drown the EURUSD price. According to the EU’s latest quarterly projections, published the day before, the European Commission expects GDP growth of 2.6% in the euro zone in 2022, compared to 2.7% in the previous outlook. Forecasts also call for eurozone inflation of 7.6% in 2022, down from 6.1% in the previous forecast.
U.S. retail sales are key
Given the recently firmer US inflation data and the mixed Fedspeak, the US retail sales will be crucial for EURUSD traders. Market forecasts suggest that retail sales in the United States could reach 0.8% MoM in June, compared to -0.3% in May. In this regard, analysts at the Australian and New Zealand Banking Group said: “A strong retail sales figure would illustrate strong demand and the need for the FOMC to maintain, if not intensify, its hawkish guidance.”
EURUSD Price Technical Outlook
EURUSD price remains in the monthly downtrend channel despite the rebound from the 61.8% Fibonacci Expansion (FE) of March-May 2022 moves around 0.9950.
Even if the major currency pair manages to break above the aforementioned descending trend channel resistance line around 1.0055 at press time, the 50-SMA level of 1.0140 could test EURUSD buyers before to direct them towards last Friday’s high of 1.0190.
It should be noted that the bearish bias needs to be validated from the monthly high near 1.0475 to repel EURUSD sellers.
Alternatively, the 61.8% FE level near 0.9950 and the December 2002 low around 0.9860 appear to be the immediate support levels to watch for during the pair’s further decline.
Next, the oversold RSI (14) and the lower line of the indicated channel near 0.9825 will be important to watch.
All in all, the EURUSD should experience another bounce, but the trend reversal is a long way off.