EUR/USD floats above 1.0870-65 support confluence as softer US data prods hawkish Fed bias
- EUR/USD edges higher past convergence of 21-DMA, 50-DMA amid sluggish session.
- US ISM Manufacturing drops to the lowest level in three years and test hawkish Fed concerns.
- ECB’s Nagel defends hawkish bias despite downbeat Eurozone, German HCOB Manufacturing PMIs for June.
- US Independence Day holiday to restrict intraday moves, German trade numbers will decorate the calendar.
EUR/USD seesaws around 1.0915-20 amid a sluggish start to Tuesday’s trading day, following a mildly positive performance on Monday. It’s worth noting that the softer US Dollar and the key technical support near 1.0870-65, as well as hawkish comments from the European Central Bank (ECB) policymaker, favored the Euro pair buyers the previous day. However, the downbeat PMIs from Germany and Eurozone join the firmer US Treasury bond yields to prod the upside momentum.
On Monday, US ISM Manufacturing PMI for June dropped to the lowest level in three years, as well as stayed below the 50.0 level for the seventh consecutive month, as it marked 46.0 figure versus 47.2 expected and 46.9 prior. On a different page, S&P Global Manufacturing PMI for June confirmed 46.3 figure, the lowest in five months, whereas the Construction Spending improved 0.9% MoM for May, versus 0.5% expected and 0.4% previous readouts.
It should be noted that the US Gross Domestic Product (GDP) and Durable Goods Orders, released the last week, improved but failed to gain support from the Fed’s preferred inflation gauge, namely the US Personal Consumption Expenditure (PCE) Price Index. Additionally, personal spending also eased and hence challenges the hawkish Fed bias.
On the other hand, the final readings of June’s German HCOB Manufacturing PMI and the same manufacturing gauge for the Eurozone came in softer-than-expected respective figures of 41.0 and 43.6 to 40.6 and 43.4.
Even so, European Central Bank (ECB) policymaker Joachim Nagel said that monetary policy signals are clearly pointing in the direction of further tightening. The policymaker also added that they will have “a way to go” with regard to additional rate increases, per Reuters.
Against this backdrop, Wall Street closed with minor gains and the yields grind higher while the US Dollar Index (DXY) dropped for the second consecutive day, which in turn favored the EUR/USD bulls.
Looking ahead, the US Independence Day holiday will offer the EUR/USD pair a lackluster trading day ahead. However, Germany’s Exports, Imports and Trade Balance figures for May will entertain the traders. Above all, receding challenges for the ECB hawks contrast with the likely bumpier road for the Fed optimists to suggest further upside of the Euro pair.
Technical analysis
A convergence of the 21-DMA and the 50-DMA, around 1.0870-65 by the press time, put a floor under the EUR/USD price. However, a descending trend line from June 22, close to 1.0920 at the latest, restricts the immediate upside of the Euro pair.