The EUR/USD pair kicked off the new week on a downbeat note and eroded a part of Friday's positive move to one-week tops amid the emergence of some buying around the US dollar. Against the backdrop of the continuous spread of the highly contagious Delta variant of the coronavirus, disappointing Chinese macro data and political tension in Afghanistan weighed on investors' sentiment. This was evident from the risk-off impulse in the markets, which provided a modest lift to the safe-haven greenback.
On the economic data front, the US Empire State Manufacturing Index dropped sharply from 43.0 to 18.3 in August, worse than market expectations for a reading of 29.0. This comes on the back of a slump in the US consumer sentiment on Friday, which forced investors to further scale back their expectations for an early policy tightening by the Fed. This was reinforced by the ongoing decline in the US Treasury bond yields, though did little to hinder a modest USD intraday uptick.
Nevertheless, the pair settled near the lower end of its daily trading range and remained depressed through the Asian session on Tuesday. This marked the second successive day of a negative move as market participants look forward to the preliminary estimate of the Eurozone Q2 GDP growth figures. From the US, the monthly Retail Sales figures might also provide some trading impetus to the pair. The key focus, however, will be on Fed Chair Jerome Powell's scheduled speech.
Apart from this, Wednesday's release of the FOMC monetary policy meeting minutes will play a key role in influencing market expectations for the next policy move by the US central bank. This, in turn, will drive the greenback in the near term and help investors to determine the next leg of a directional move for the major.
Short-term Technical Outlook
From a technical perspective, the recent bounce from the vicinity of YTD lows stalled near a short-term ascending trend-line breakpoint. The mentioned support-turned-resistance, around the 1.1800 mark, should now act as a key pivotal point for short-term traders. A sustained move beyond might trigger a short-covering move and lift the pair further beyond the 1.1830-35 region. The next relevant hurdle is pegged near the 1.1880 supply zone before the pair eventually aims to reclaim the 1.1900 mark.