EUR/USD prods 1.1250 hurdle on hawkish ECB talks ahead of US Retail Sales


  • EUR/USD edges higher amid hawkish ECB signals, US Dollar’s retreat.
  • ECB’s Nagel cites “sticky” inflation to favor rate hike in September, ECB’s Vasle emphasizes resilient and high core inflation.
  • Mixed sentiment, unimpressive US data prod US Dollar bulls ahead of US Retail Sales.
  • ECB talks, second-tier US data will also be watched for clear directions as bulls struggle to cross key resistance.

EUR/USD bulls keep flirting with the 1.1250 resistance for the third consecutive day amid the early hours of Tuesday’s Asian session, staying around the highest levels since February 2022. In doing so, the Euro pair justifies hawkish bias at the European Central Bank (ECB) while cheering the US Dollar’s retreat. However, a cautious mood ahead of today’s key US Retail Sales for June and a mixed mood in the market seems to prod the major currency pair’s buyers.

On Monday, European Central Bank (ECB) policymaker Boštjan Vasle said, “We need to keep tightening policy at our next meeting.” The policymaker emphasizes the resilient and high core inflation while favoring the hawkish move.

On the same line was ECB policymaker and Bundesbank Chief Joachim Nagel who said “I expect the ECB will raise interest rates later this month by 25 bps” as core inflation in the Eurozone is ‘very sticky’ but “For the September meeting, we will see what the data will tell us.”

It should be noted that the looming fears of Germany’s recession and the recent easing in China’s economic recovery seem to prod the Euro bulls and allow the US Dollar to lick its wounds despite unimpressive data at home.

On Monday, New York (NY) Empire State Manufacturing Index for July eased to 1.1 from 6.6 prior and 0.0 market forecasts. The data failed to inspire the US Dollar Index (DXY) sellers initially before weighing on the DXY, probing Friday’s recovery backed by the upbeat prints of the University of Michigan’s (UoM) Consumer Sentiment Index and consumer inflation expectations for the said month.

Elsewhere, the return of the US-China tension and the market’s consolidation ahead of late July’s Federal Open Market Committee (FOMC) Monetary Policy Meeting also prod the EUR/USD bulls.

Against this backdrop, Wall Street closed with minor gains whereas the US Treasury bond yields remained pressured.

To overcome the inaction around the key upside hurdle, US Retail Sales for June, expected to rise to 0.5% versus 0.3% prior, will be crucial to watch. Also important will be the ECB talks and the US Industrial Production for June, expected -0.1% versus -0.2% prior.

Technical analysis

A higher high on prices joins a higher high on the RSI (14) line to validate the latest AUD/USD run-up. However, a clear upside break of the 1.1250 hurdle appears necessary for the Aussie pair buyers to target the February 2022 high of near 1.1495.

That said, the pullback moves appear unimpressive unless the quote stays beyond the previous resistance line stretched from early February, around 1.1160 by the press time.