EUR/USD nudges lower as US Dollar picks up after an alleged US-China deal

• The Euro has posted a limited bearish reaction to the reached US-China trade deal. 
• The lack of details on the agreement has raised doubts about its scope. 
• EUR/USD remains indecisive, looking for direction between 1.1375 and 1.1455.

EUR/USD has pulled lower to levels just above 1.1400 on Wednesday, as the US Dollar strengthened following headlines that US and Chinese representatives have reached a framework to reduce trade tariffs.

The deal now has to be approved by US President Donald Trump and Chinese Premier Xi Jinping, and the details of it have been scarce, causing a tepid market reaction so far.

Investors have welcomed the news with scepticism, as it keeps tariffs in place, albeit at lower levels, and offers little guarantee of its durability. The pair's reaction remains constrained within the same range between 1.1375 and 1.1455 seen over the last two weeks.

US Commerce Secretary Howard Lutnick affirmed that both countries have reached an agreement to implement the Geneva consensus, which was previously abandoned due to US complaints on China's restrictions on rare earths trade.

Beyond that, a US federal court said that Trump's most sweeping tariffs will remain in effect temporarily, at least until the judges decide on an initial lower court decision that ruled them illegal a few weeks ago.

On the economic calendar front, the highlight will be May's US Consumer Price Index (CPI) data due later in the day, which is expected to show that inflation accelerated moderately and might revive fears of stagflation. 

Daily digest market movers: Markets are cautious ahead of US CPI figures

The trade negotiations between the US and China have ended with a framework that, in the best of cases, brings the situation back to last month´s Geneva consensus. The market reaction has been far from enthusiastic.

• The focus on Wednesday will be on the US CPI figures, which are expected to have increased steadily at a 0.2% pace month-over-month in May, with the yearly inflation accelerating to 2.5% from 2.3% in the previous month.
  
• The market will be particularly attentive to deviations in consumer inflation, as it will determine the Federal Reserve's (Fed) near-term monetary policy plans. Futures markets anticipate that the central bank will keep interest rates on hold in June and July, but they are evenly split about September's decision.
  
• Apart from that, a $39 billion auction of US 10-year Treasury bonds will be observed with interest amid increasing concerns about US fiscal stability. The main focus will be on the demand from indirect bidders, which amounted to 71% of May's auction. A significant decline in it might increase bearish pressure on the US Dollar.
  
• European data released on Tuesday revealed a larger-than-expected improvement in investors' confidence, which rose to a 0.2 reading in June, up from a -8.1 in May and a -19.5 in April, boosted by brighter expectations about the Eurozone's economic outlook.
  
• European Central Bank (ECB) policymaker Olli Rehn stated that the central bank should focus on keeping inflation steady at 2% and warned about complacency over the inflation outlook. These comments echo ECB President Christine Lagarde's remarks after last week's meeting and curb hopes of further monetary easing in the coming month

Technical analysis: EUR/USD keeps treading water below 1.1455 

EUR/USD is consolidating gains after the late-May rally, with price action trapped within an 80-pip range below 1.1455 since early June. The Relative Strength Index (RSI) is wavering around the 50 level on the 4-hour chart, but the rejection near 1.1500 last week and a bearish divergence suggest that bulls have lost momentum.

The pair is looking for direction above 1.1400 on Wednesday with key support at 1.1375 (near June 6 and 10 lows). A breach of this level is needed to confirm a deeper correction heading to 1.1315 (May 30 low) and 1.1215-1.1220 (May 28 and 20 lows).

On the upside, immediate resistance is at the June 3 high at 1.1455, ahead of the June 5 high at 1.1495.