EURUSD edged out a 3-session high at 1.1343 (R1 for the day), coming within 4 pips of the 3-month high seen last Friday.
Recent price-movement dynamics have mostly reflected Dollar volatility, with the Greenback diving in the wake of last Friday’s sub-forecast US May jobs report (which exacerbated fears that slowing in manufacturing and capex on trade uncertainties are spilling over to the broad economy and labor market) before rallying back on the news that the US and Mexico have reached a deal on migration, which allayed investor concerns on trade and ignited a 6bp-odd spike in the 10-year US T-note yield.
This came after EURUSD posted a 1.5% rise last week, the biggest weekly advance since August last year. The pair now looks stuck without strong directional impulse.
US inflation figures this week are the biggest market-moving risk this week, along with retail sales at the end of the week. The CPI data will be scrutinized as it’s inflation that’s the nexus of the FOMC’s policy stance. The CPI is estimated at a 0.1% gain in May, with a 0.2% increase in core prices, following respective April readings of 0.3% and 0.1%. As-expected gains would result in a headline y/y gain of 1.9%, down from 2.0% in April, while core prices should rise 2.1%, a steady pace from April. Overall, the inflation outlook remains benign, though with an updraft into the end of Q1 and early-Q2 from a petroleum price rebound that lost steam through May.
Tame data would be supportive for Treasuries, and weaker than expected results could further heighten Fed rate cut expectations down the road, which would in the event likely spark a fresh rotation lower in the Dollar.
EURUSD has immediate Support at 1.1310 and at 1.1276. Resistance is set at 1.1340-1.1350.
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Andria Pichidi
Market Analyst
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