EUR/USD recovers most of the intraday losses after weak U.S. retail sales figures

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The EUR/USD bounces near 1.0740 in the American session on Tuesday. The EUR/USD pair finds buying interest as the low growth in the monthly U.S. retail sales data for May affected the U.S. Dollar (USD). The U.S. Census Bureau reported that retail sales data, a key measure of household spending, grew at a slower rate of 0.1% compared to the expected 0.2%. In April, retail sales remained flat.

A smaller-than-expected increase in retail sales data was expected to put substantial pressure on the U.S. Dollar, as it would boost investors’ confidence that progress in the disinflation process would continue. Currently, the U.S. Dollar Index (DXY), which tracks the value of the Dollar against six major currencies, trimmed all its intraday gains and fell near 105.30. Weak retail sales data would also boost market expectations that the Federal Reserve (Fed) will cut interest rates twice this year.

Meanwhile, Fed policymakers maintain their argument that there will only be one rate cut this year. Officials have acknowledged that progress in reducing inflation to the desired 2% rate has resumed after the May Consumer Price Index (CPI) report showed that price pressures cooled more than expected. Although the soft CPI report was a relief for policymakers, they wanted to see a decline in inflation for months before the start of the policy normalization process.

Technical Analysis: EUR/USD remains below the 200-day EMA

The EUR/USD faces pressure in an attempt to surpass the immediate resistance at 1.0740. The descending edge of the symmetrical triangle formation on a daily timeframe, drawn from the December 28, 2023 high at 1.1140, is acting as a significant barrier for Euro bulls.

The main currency pair is expected to find support at 1.0636, near the ascending trend line of the chart pattern drawn from the October 3, 2023 low at 1.0448, and the horizontal support drawn from the April 16 low around 1.0600.