Title: EUR/USD retreats to 0.9950 on softer German Factory Orders, focus on US PMI, ECB

September 6, 2022 02:13 AM ET

By: AnalysisWatch

The EUR/USD lost its bullish momentum after the release of weaker economic data from European Union powerhouse Germany. Nonetheless, the major currency pair is posting its biggest daily gains in a week amid risk-off sentiment. That said, the pair was down to 0.9950 before Tuesday's European opening, after hitting intraday highs of 0.9970 earlier in the day.

On a non-seasonally adjusted basis, German manufacturing orders fell 13.6% year on year in July, compared to -6.1% expected and -9.0% previously.

Interestingly, talk of additional aid measures to stimulate the economic recovery seems to have favored the optimists during the markets. That said, the new British Prime Minister, Liz Truss, is in favor of a £130 billion energy plan, while the People's Bank of China (PBOC) is cutting the reserve requirement ratio (RRR).

In addition, politicians in Germany and the Eurozone are all fighting the recession with a strong push to defend energy companies and stockpile for the winter.

To illustrate the mood, U.S. 10-year Treasury yields rose 2.5 basis points (bps) to 3.21% at press time. In doing so, U.S. benchmark bond prices reversed Friday's losses. Intraday gains of 0.50% in S& P 500 futures, as well as a pullback in the U.S. Dollar Index (DXY) from the previous day's 20-year high, may also reflect the risk-on mood.

Subsequently, EUR/USD traders may see some slow movement ahead of the release of the ISM Services Index for August, expected at 55.5 from 56.7 previously.

However, special attention will be paid to Thursday's European Central Bank (ECB) monetary policy meeting announcement, as the bloc's central bank is again set to raise rates by 0.50% despite recession fears and the energy crisis.