• EUR/USD attracts some buying and stalls its retracement slide from over a two-week high.
• A modest USD strength caps the upside in the absence of any relevant fundamental trigger.
• Traders also seem reluctant ahead of the US CPI on Tuesday and the FOMC on Wednesday.

The EUR/USD pair recovers a few pips from the Asian session low and for now, seems to have stalled its retracement slide from over a two-week high touched on Friday. Spot prices currently trade just below mid-1.0700s, nearly unchanged for the day, as traders seem reluctant to place aggressive bets on the first day of a crucial week.

The latest US consumer inflation figures are due for release on Tuesday and will be followed by the highly anticipated FOMC monetary policy decision on Wednesday. The key data/event will provide more cues on the Federal Reserve’s near-term policy outlook, which, in turn, will determine the next leg of a directional move for the US Dollar (USD) and provide some meaningful impetus to the EUR/USD pair.

In the meantime, a modest uptick in the US Treasury bond yields assists the USD to build on Friday’s bounce from its lowest level since May 24. That said, the uncertainty over the Fed’s rate-hike path is holding back the USD bulls from positioning from any further appreciating move. This, along with rising bets for additional rate hikes by the European Central Bank (ECB), continues to lend support to the EUR/USD pair.

It is worth recalling that the recent dovish rhetoric by a slew of Fed officials reaffirmed market expectations for an imminent pause in the US central bank’s year-long policy tightening cycle. That said, surprise rate hikes by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) last week suggest that the fight against inflation is not over yet, supporting prospects for further tightening by the Fed.

In fact, Fed fund futures indicate that markets have been pricing in the possibility of another 25 bps lift-off at the July FOMC meeting and a stronger US CPI print this week will reaffirm bets. In the meanwhile, the aforementioned fundamental backdrop warrants some caution before positioning for a firm intraday direction in the absence of any relevant market-moving economic releases, either from the Eurozone or the US.

Technical levels to watch

EUR/USD