EUR/USD eases from multi-month high past 1.1200 as traders reconfirm Fed bias

• EUR/USD retreats from the highest level since February 2022 amid mixed concerns.
• Friday’s US data, weekend headlines about Sino-US ties allow Euro bulls to take a breather.
• Downbeat US inflation numbers flag concerns about Fed’s nearness to policy pivot; ECB members stay hawkish despite mixed Eurozone data.
• Second-tier EU/US statistics can entertain EUR/USD traders amid Fed blackout period.

EUR/USD bulls take a breather after posting the biggest weekly jump since November 2022, declining to 1.1220 amid the early hours of Monday’s Asian session. In doing so, the Euro pair takes clues from Friday’s US data and the weekend headlines about the US-China ties to consolidate the previous weekly gains amid the two-week official blackout period for the Federal Reserve (Fed) policymakers ahead of late July’s monetary policy meeting.

Friday’s US consumer sentiment figures joined inflation expectations to challenge the previously released inflation data that raised concerns that the Federal Reserve (Fed) is nearing the end of the hawkish cycle. The same joins the weekend headlines flashing mixed clues about the US-China ties, as well as technical details, to allow the EUR/USD to retreat from the multi-month high.

On Friday, the preliminary reading of the University of Michigan's (UoM) Consumer Confidence Index rose to 72.6 for July from 64.4 in June, versus the market’s expectations of 65.5. Further details suggested that the one-year and 5-year consumer inflation expectations per the UoM survey edged higher to 3.4% and 3.1% in that order versus 3.3% and 3% respective priors. Before that, the US Consumer Price Index (CPI) and Producer Price Index (PPI) for June dropped to 3.0% and 0.1% on a yearly basis from 4.0% and 0.9% YoY in that order, which in turn drowned the US Dollar and propelled the EUR/USD pair toward the highest level since February 2022.

Further, Reuters reports US Treasury Secretary Janet Yellen’s comments from a meeting of Group of 20 (G20) finance ministers and central bankers in India as she said, “I am eager to build on the groundwork that we laid in Beijing to mobilize further action." Her statements raised hopes of improving relations between the US and China. However, the policymaker also cited a lack of proper address to China’s unfair trade practices and challenged optimists, which in turn allowed the US Dollar to lick its wounds due to its safe-haven allure.

On the other hand, the European Central Bank’s (ECB) June policy meeting revealed on Thursday that minimum two successive rate hikes needed for inflation projections to materialize. It should be noted that the recent industrial production and foreign trade numbers for the Eurozone haven’t been supportive of the hawkish ECB bias and hence support the late EUR/USD retreat.

It’s worth noting that the latest week’s US data joined a jump in the meme stocks to propel equities and drowned the US Treasury bond yields, as well as the US Dollar Index.

Looking forward, second-tier activity and Retail Sales data from the US may entertain the EUR/USD traders amid the Fed blackout period, raising hopes of witnessing a pullback in prices.

Technical analysis

Friday’s Doji candlestick at the multi-month high joins the overbought RSI (14) line to suggest a pullback in the EUR/USD prices unless the quote crosses the recent top surrounding 1.1250. However, the previous resistance line stretched from February 2023, close to 1.1155 at the latest, puts a floor under the Euro price.