EUR/USD stays vulnerable at five-week low near 1.0900 ahead of US Retail Sales

• EUR/USD fades corrective bounce off multi-day low, remains depressed at monthly low after two-day losing streak.
• Clear downside break of key support, broad US Dollar strength keeps Euro bears hopeful.
• Holidays in multiple markets may allow bears to take a breather amid pre-data anxiety.
• US Retail Sales will be crucial for clear directions as Greenback ignores dovish Fed bets to stay firmer.

EUR/USD remains on the back foot at the lowest levels since early July, despite making rounds to 1.0900 as markets in Asia open for Tuesday’s trading. In doing so, the Euro pair fades the late Monday’s corrective bounce off the multi-day low as traders brace for the key US Retail Sales for July amid holidays in multiple European markets. It’s worth noting that the US Dollar ignores the looming fears of the Fed’s policy pivot in September while tracing firmer US Treasury bond yields amid economic woes and jittery markets while the Euro remains depressed amid mixed concerns at home.

On Monday, Germany’s Wholesale Price Index (WPI) for July edged higher to -2.8% YoY from -2.9% previous readings but came in softer than -2.6% expected. However, the monthly WPI figures reprinted the -0.2% MoM numbers versus -1.4% market forecasts.

Following the data, the German Economy Ministry noted that current early indicators do not yet point to a sustainable economic recovery in the coming months, per Reuters. The report, however, also added that the expected cautious recovery in private consumption, services and investment is showing the first signs of hope, which are likely to strengthen as the year progresses.

On the other hand, US Dollar Index (DXY) rose to its highest level since July 07 before retreating from 103.46, around 103.16 by the press time. That said, the US 10-year Treasury bond yields rose to the highest level in nine months whereas the two-year counterpart also refreshed the monthly peak amid the market’s dumping of the Treasury bonds. It’s worth noting that such higher yields previously triggered recession woes and the risk-off sentiment which in turn favored the US Dollar due to its haven appeal.

That said, the looming debt crisis in China and its contagion impact, especially amid the fears that the world’s biggest industrial player losses economic recovery, weighs on sentiment even if the easing inflation concerns allow market players to remain hopeful. Also challenging the market sentiment and the EUR/USD could be Russia’s firing of warning shots at a warship in the Black Sea and readiness to equip new nuclear submarines with hypersonic missiles.

Recently, US Treasury Secretary Janet Yellen crossed wires, via Reuters, late Monday while citing the risks to the global economic developments from China’s slowdown, the Russia-Ukraine war and climate change-related disasters and their spillover effects.

Amid these plays, Wall Street closed with minor gains but failed to impress buyers amid impending economic concerns.

Looking ahead, holidays in many European markets, including Germany, may restrict EUR/USD moves, especially ahead of the US Retail Sales for July. However, the latest easing in the New York Fed's one-year inflation expectations highlight the data and hence any firmer readings may help the Euro pair to extend the technical breakdown.

Technical analysis

A daily closing below the 100-DMA and an ascending trend line from September 2022, respectively near 1.0930 and 1.0980, directs EUR/USD towards a convergence of the 200-DMA and an upward-sloping support line from November 22, 2022, close to 1.0780.