Upside potential seen above 1.0930

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• The US dollar slid after the release of weak US economic data.
• Key US employment data is due on Thursday and Friday.
• The EUR/USD managed to retake 1.0900 on Monday, but it remains under a bearish trendline.

The EUR/USD recovered after the release of weak US data and climbed back above 1.0900 during the American session. Markets could remain calm on Monday due to US holidays. However, the Greenback is losing momentum, and upcoming employment data and the release of the FOMC minutes will be crucial.

Economic data released on Monday showed a negative revision to the Eurozone June Manufacturing PMI, with the headline dropping to 43.4 from the preliminary 43.6. The Service sector data will be released on Wednesday. Despite the weak figures, and as inflation remains eleavted, the European Central Bank (ECB) is set to raise interest rates at the next meeting on July 22, and the odds of another hike in September are above 50%. 

On Monday, a weaker US dollar boosted the rebound in EUR/USD from 1.0870 to 1.0935, as data from the US came in below expectations. The ISM Manufacturing PMI dropped from 46.9 to 46, against expectations of a modest increase to 47.2. The Prices Paid Index fell from 44.2 to 41.8, and the Employment Index fell from 51.4 to 48.1.

The Dollar has been supported by hawkish Federal Reserve comments. On Wednesday, the Fed will release the minutes of its latest meeting, and on Thursday and Friday, key labor market data is due, including ADP, Jobless Claims, JOLTS, and Nonfarm Payrolls. Weak data could weigh on Fed rate hike expectations, while the market is currently looking at a 25 basis points hike in July.

EUR/USD short-term technical outlook 

The EUR/USD finished flat and continued to trade sideways just above the 20-day Simple Moving Average (SMA) around 1.0860. A daily close well below this level would weaken the outlook for the Euro. Although the pair has recovered from weekly lows, it is not showing great conviction to resume the uptrend.

On the 4-hour chart, the EUR/USD is moving with a bearish bias while under a trendline that currently stands at the 1.0930 area, which also contains a horizontal resistance. A break above 1.0930/35 would point to further gains, targeting 1.0960, with attention turning to 1.1000. The key short-term support is seen around 1.0850/60. Below this level, further losses seem likely, with the next support at 1.0825. Technical indicators offer mixed signs. 

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