• EUR/USD reverses Thursday’s recovery, holds lower ground near weekly bottom.
  • DXY benefits from firmer US Treasury yields during quiet session.
  • Market sentiment dwindles amid mixed signals for stimulus, inflation.
  • Eurozone sentiment figures can offer intermediate entertainment ahead of the key US data/events.

EUR/USD remains heavy inside a 10-pips trading range around intraday low, down 0.09% near 1.2185 heading into Friday’s European session. In doing so, the currency-major pair fades bounce off the weekly low, marked the previous day, mainly on the US dollar rebound ahead of the key inflation figures and budget announcements.

The US dollar index (DXY) benefits from the market’s rush to safety as cautious sentiment before crucial catalysts. Also favoring the greenback gauge could be the US Treasury yields that stay firmer for the second consecutive day.

That said, upbeat US data and chatters over US President Joe Biden’s $6.0 trillion budget proposal trimmed the USD losses during the late Thursday. The recovery moves could also benefit from US Treasury Secretary Janet Yellen’s comments rejecting reflation fears.

Meanwhile, uncertainty over Republicans’ support for the heavy stimulus, especially when the infrastructure spending plan of $1.7 trillion is already looming amid the record deficit, adds to the market’s favor to the US dollar. Furthermore, A quiet session in Asia and the covid woes in Japan and Australia also put a safe-haven bid under the greenback.

It’s worth noting that the EUR/USD traders pay a little heed to the ECB policymakers’ comments terming inflation hike as temporary and flashing no threats to the easy money policies. The reason could be comparatively stronger fundamentals of the US and budget guidelines than the bloc.

Amid these plays, stocks futures in the US and Eurozone track Wall Street gains to print a three-day uptrend, with mild upside. Though, the US Treasury yields probe the market bulls before US Personal Consumption Expenditure (PCE) Price Index for April and budget announcement.

Although the US inflation figures are likely to favor the US dollar, upbeat expectations from the budget may tame the greenback’s upside, likely restricting EUR/USD losses, unless any negative surprises for Biden’s plans.

Read: US PCE inflation preview: Gold remains key asset to watch

Technical analysis

In addition to Thursday’s bullish Doji, the pair’s sustained close beyond 10-day EMA and an ascending support line from March-end, also joined by a strong Momentum line, add to the EUR/USD buyer’s optimism until the quote stays above 1.2170. Also acting as the downside support is April’s top near 1.2150. Alternatively, multiple tops surrounding 1.2240-45 and the recently flashed highest level since early January around 1.2265 challenge the currency pair’s short-term upside.

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