EUR/USD Is Under Pressure And Treads Water Near 1.0720

During the Asian session on Wednesday, EUR/USD hovers around 1.0720, attempting to recoup the previous day's losses. Tuesday's publication of disappointing Eurozone data has put pressure on the pair.

The Producer Price Index (PPI) for the Eurozone decreased to -0.5% on a monthly basis and -7.6% on an annual basis in July, compared to -0.4% and -3.6%, respectively, in June. In addition, the HCOB Composite PMI for August decreased to 46.7 from 47 in July, which was anticipated to remain unchanged.

The discouraging statistics have increased the likelihood of the European Central Bank (ECB) shifting away from its hawkish posture due to concerns about a potential recession. This is exerting a downward force on the EUR/USD exchange rate.

Christine Lagarde, president of the ECB, advocated for central banks to maintain a firm anchor on inflation expectations. In a similar vein, Joachim Nagel, the president of the Deutsche Bundesbank and a member of the ECB Council, voiced support for price stability but refrained from providing further details at the time.

In addition, on Tuesday, The Currency, an Irish business publication, published an interview with ECB Chief Economist Phillip Lane from August 31. During the interview, Lane praised the softening of August's inflation numbers. Nonetheless, he emphasised the significance of maintaining such favourable statistics in order to withstand the pressure from the more hawkish ECB members.

At the time of writing, the US Dollar Index (DXY), which compares the Greenback to six other main currencies, is trading higher near 104.80. The dollar's resilience is maintained by the rising yields of US Treasury bonds. The 10-year US Treasury yield increased by 1.85%, reaching 4.26%.

However, United States (US) Factory Orders for July plummeted to their lowest levels since the middle of 2020, with a month-on-month decline of -2.1%, far below the expected -0.1% and reversing from the previous 2.3% growth.

Christopher Waller, the governor of the Federal Reserve, told CNBC that the decision to raise or cease rate increases would depend on the data. Waller also stated that data suggests a favourable outlook for a soft-landing scenario, a sentiment that strengthened the US Dollar.

Later in the day, market participants will likely monitor the upcoming data releases. July German Factory Orders and Eurozone Retail Sales are included in these datasets. The US ISM Services PMI for August and the US S&P Global PMIs are forthcoming. These releases will provide insights for EUR/USD wagering strategies.