EUR/USD treads water below 1.1900 despite US Treasury yields rebound

• EUR/USD extends bearish consolidation inside a choppy range after two-day downtrend.
• Covid woes battle stimulus hopes but EU data favor corrective pullback.
• DXY shrugs off Treasury yields’ recovery after closing at the lowest levels since February.
• Risk catalysts become the key, virus updates and infrastructure spending news are important.

EUR/USD remains sidelined, recently easing to 1.1870, heading into Tuesday’s European session. In doing so, the major currency pair pauses the two-day downtrend despite marking no major moves of late.

The quote’s latest inaction could be linked to the mixed clues concerning the Delta covid variant and monetary relief package headlines. Among them, the comments from the US Centers for Disease Control and Prevention (CDC) terming Delta variant of the virus as “likely more severe” than earlier versions, per Reuters, gain major attention. On the same line was the reintroduction of the local lockdowns in China and Aussie hardships due to the COVID-19 strain.

Alternatively, the International Monetary Fund (IMF) announcement that the historical allocation of $650 billion to its Special Drawing Rights (SDRs) to help combat the pandemic and infuse liquidity into the markets becomes crucial. Additionally, US Senators’ optimism towards getting President Joe Biden’s over $1.0 trillion infrastructure spending plan through the house during this week also battle the bears.

It’s worth mentioning that the EUR/USD prices failed to cheer better-than-forecast German Retail Sales for July and an upward revision to the Eurozone Manufacturing PMI for the stated month the previous day. The US ISM Manufacturing PMI, on the other hand, dropped below 60.9 market forecasts and 60.6 prior readouts to 59.5. It’s worth noting that the latest activity numbers from China also disappointed markets and raised concerns over the global economic recovery from the pandemic.

Amid these plays, US Dollar Index (DXY) remains indecisive around 92.00 while ignoring a mild rebound in the US 10-year Treasury yields after posting the lowest daily closing since February. Further, the S&P 500 Futures rise 0.18% intraday after a downbeat week-start on Wall Street.

Considering a lack of major data/events, EUR/USD traders will need to keep their eyes on the qualitative catalysts and Fedspeak for fresh impulse.

Technical analysis

EUR/USD portrays a bullish pennant above the 200-SMA on the four-hour (4H) chart amid a weaker Momentum line. Hence, the pair traders seem to wait for confirmation before taking fresh long positions. Should the pair confirm the bullish chart pattern, by crossing the 1.1900 round figures, it may take a breather around 1.1910 before rallying towards the theoretical target of 1.2060. Meanwhile, a downside break of 200-SMA level of 1.1850 will quickly drag the EUR/USD prices to July 22 tops surrounding 1.1830 before directing sellers to the 1.1800 round figure and the previous month’s bottom near 1.1750.