EUR/USD touches 1.12 as DXY inches lower toward 97

Regardless of the weak trading volume, the EUR/USD pair touched 1.12 handle in the late U.S. afternoon as the greenback remained under selling pressure. As of writing, the pair was trading at 1.1195, up 0.26% on the day.

Although today's data from the euro area came in below expectations, the pair was able to recover yesterday's losses as the risk aversion on Tuesday helped the euro find demand against its rivals as a funding currency. In fact, the Euro Index advanced to 90.30, recording a daily gain of 0.16%. On the other hand, plummeting short and long-term U.S. Treasury yields dragged the US Dollar Index to its session low at 97.15 in the NA session, providing an additional boost to the pair. 

• Forex today: not as much inflation in US hurts DXY

Tomorrow's economic docket will feature the consumer inflation and unemployment data from the EU. The core CPI on a yearly basis is expected to ease to 1% in May from 1.2% in April. Today's weak inflation growth from Germany, which fell to 1.5% in May from 2% in April on a yearly basis, suggests that tomorrow's data is likely to be dismal as well, supporting Draghi's view that an extraordinary monetary accommodation is still needed.

• ECB: will market expectations be too high? - Nomura
• ECB: No significant change in forward guidance, exit will be gradual - HSBC

Technical outlook

FXStreet analyst Valeria Bednarik explains that chances of a downward move are quite limited, as it's clear that the market is far from interested in buying the greenback. According to the analyst, in the 4 hours chart, the price is now battling around its 20 SMA that lost its bearish strength, whilst technical indicators have bounced from near oversold territory, now struggling around their mid-lines. She furher adds that the pair needs now to advance beyond 1.1220, the immediate resistance to be able to advance further, with scope to extend its rally beyond current yearly high and up to 1.1300. Bednarik identifies supports at 1.1160, 1.1120 and 1.1080, and resistances at 1.1220, 1.1260 and 1.1300. 

• EUR/USD: bearish bias on fundamentals - Scotiabank