EUR/USD retreats below 1.2000 on US dollar bounce, German CPI in focus

• EUR/USD snaps three-day uptrend while stepping back from one-month top.
• US dollar bounce, market consolidation trigger pullback moves.
• Vaccine jitters, Sino-American tussles battle stimulus hopes to challenge risk-on mood.
• German CPI can recall the bulls but it all depends upon risk catalysts.

EUR/USD stays pressured around intraday low of 1.1972 while heading into Thursday’s European session. In doing so, the currency major pair drops for the first time in four days as stepping back from a one-month high of 1.1989 flashed earlier in Asia.

The US dollar index (DXY) bounce off a three-week low could be cited as the major reason for the pair’s latest pullback. Also contributing to the quote’s weakness could be the market’s cautious sentiment ahead of Germany’s Harmonized Index of Consumer Prices  (headline inflation figures) as well as the key US data. Furthermore, the latest challenges to risks, concerning China and the coronavirus (COVID-19) vaccine also favor.

The US dollar index (DXY) slumped to the fresh low since March 18 before bouncing off 91.56, up 0.02% intraday by the press time. The greenback’s recovery might have taken clues from the US 10-year Treasury yield that reverses the previous day’s positive performance around 1.63%.

It’s worth mentioning that the shift in the market sentiment could be traced from China where Beijing’s diplomat from Hong Kong indirectly warns the US. On the same line, Taiwan eyes strong ties with America despite China’s repeated objection, which in turn adds fuel to the Sino-American tussle. Furthermore, blood clotting due to the AstraZeneca and Johnson & Johnson’s vaccines may not be worrisome for the US and the UK but Brussels as it struggles over jab supplies and the pandemic is still a problem.

Amid these plays, S&P 500 Futures trim intraday gains while staying up 0.10% on a day whereas Euro Stoxx 50 Futures drop 0.20% by the press time.

It should be noted that the ECB and the Fed bosses, namely Christine Lagarde and Jerome Powell, rejected reflation fears by staying hopeful over faster economic recovery. Though, market players need strong proofs and may look towards the economic calendar for the same. While the US numbers have been confirmative, figures from the bloc couldn’t satisfy the bulls, which in turn highlights today’s German inflation figures, expected to reprint 2.0% YoY, for fresh impulse. Although covid-led lockdowns in the region could harm price pressures in the European growth engine, any positive surprises will be welcomed with zeal.

Read:  US March Retail Sales Preview: Can a strong rebound ramp up inflation expectations?

Technical analysis

Failures to cross a five-week-old horizontal resistance around 1.1990 need to break below the 50-day SMA level of 1.1960 to recall the short-term EUR/USD sellers. Meanwhile, an upside clearance of 1.1990 may not hesitate to test the mid-February lows near 1.2025.