EUR/USD pulls back to 0.9950 after weak German factory orders, focus on US PMI.

• EUR/USD trimmed daily gains after negative data from Germany.
• Factory orders growth in Germany fell to -13.6% yoy in July.
• Risk appetite and firm yields reinforce the pair’s recovery moves.
• The US services PMI may entertain traders ahead of the ECB on Thursday.

EUR/USD loses momentum to the upside on weaker economic data from bloc powerhouse Germany. Still, the currency pair posts the biggest daily gains in a week amid an environment of risk appetite. However, the pair falls to 0.9950 at the European open on Tuesday, after updating the intraday high to 0.9970 earlier in the day.

German factory orders for the month of July marked a contraction of 13.6% yoy vs. -6.1% expected and -9.0% previously on a seasonally adjusted basis.

Notably, talk of more aid packages to fuel the economic recovery appears to have favored the optimists during the markets’ high. That said, incoming UK Prime Minister Liz Truss is banking on a £130bn energy plan, while the People’s Bank of China (PBoC) cuts the Reserve Requirement Ratio (RRR). In addition, politicians in Germany and the Eurozone are battling recession woes with a strong push to defend energy companies and stocks for the winter.

Easing of the Fed’s hawkish bets could also favor buyers of the pair. According to the latest reading, the CME’s FedWatch tool points to a 60% chance of a Fed rate hike in September, vs. 75% reported the previous week.

Portraying the mood, the 10-year US Treasury yield is up 2.5 basis points (bps) to 3.21% at time of writing. Thus, the benchmark US bond coupons reverse Friday’s losses. Intraday gains of 0.50% in S&P 500 Futures, as well as the Dollar Index (DXY) retreat from the previous day’s 20-year high, could also portray risk-on sentiment.

As for EUR/USD, some lackluster moves are possible ahead of the August ISM Services PMI release, which is expected to be 55.5 vs. 56.7 previously. However, the focus will be on Thursday’s European Central Bank (ECB) Monetary Policy Meeting announcements as the central bank may revert to a 0.50% rate hike despite recession fears. and the energy crisis.

EUR/USD Technical Analysis

EUR/USD buyers need to cross the monthly resistance line around the 1.0000 psychological magnet for conviction. That said, the 10-DMA hurdle near 0.9980 restricts immediate upside moves for the pair.