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The EUR/USD finished the week on a negative note, closing down 48 pips at $1.2996. However, the pair was able to finish of the lows set earlier in the day down at $1.2944. Analysts were pointing towards recent economic data out of Europe as a catalyst for the weakness, particularly the CPI data which came in well below the ECB's 2% mandate.

According to an analyst at Rabobank,

Retail spending in Germany was a bit weaker than expected in April, falling -0.4% MoM. There were also some revisions to recent data and the profile of spending through recent months now shows that spending has risen 1.8% YoY whereas the market had anticipated a 1.1% increase. This 1.8% YoY rise is modest growth, but the best annual reading since June 2012. Not a strong message but consistent with our view that the economy is not spiraling downwards and that economy-wide growth continues in Germany.

They went on to comment,

the CPI increased 1.4% YoY in the eurozone in May, according to the Flash estimate. The CPI has been below the ECB's 2.0% target for five months now. This release now also includes a Flash estimate of core CPI and it increased 1.2% YoY, a very subdued rise. Clearly inflation pressures present no obstacle to the ECB further easing policy if they judge the real economy warrants it.

Other analysts were focusing on recent U.S. economic data as being the main driver for the previous day's price action, citing the strong consumer confidence numbers out of the U.S. as a big reason for the reversal in the greenback.

According to Kathy Lien of BK Asset Management,

Today's U.S. economic reports were mixed. Personal incomes failed to grow in the month of April while personal spending dropped 0.2%, the first decline since May 2012. It may be good behavior for consumers to cut spending when incomes are flat lining, but lower consumption is not conducive to growth. The PCE Deflator also declined for the second month in a row, a sign that inflationary pressures remain low.

Lien went on to comment,

However, the dollar recovered when the Chicago PMI index surged to its highest level since March 2012. With manufacturing activity slowing in the NY and Philadelphia regions, investors were bracing for the worse and when the data surprised to the upside, they rallied the dollar in relief. The recovery in the greenback was further supported by the upward revision in the University of Michigan's Consumer Confidence index. The preliminary numbers showed that consumer sentiment improved significantly in May, but the revision took the index to its highest level since July 2007, or more than 5 years.

As we head into what looks like another very busy week of economic data, some analysts are turning to the short term charts in order to get a feel for big levels that should be monitored.

FXStreet.com analyst Val Bednarik noted:

The EUR/USD starts the week where it left past Friday, right below $1.3000 level. With low volatility around, and several first line fundamental data to be released this week, investors will likely remain cautious, and no fireworks should be expected this Monday. As per the technical outlook, the hourly chart shows price being capped by a bearish 20 SMA, while indicators turn lower below their midlines, signaling some bearish interest around. In the 4 hours chart the upward momentum eased, with indicators now nearing their midlines although still in positive territory, and price standing above 20 SMA, offering short-term support around $1.2960. Expect losses below this last to see price approaching $1.2920, while the upside will likely remain limited by $1.3060, last week's high.

From a longer term technical perspective, the EUR/USD still remains fairly range bound between $1.2800 and $1.3200. Furthermore, both short-term moving averages and the RSI (14) remain in a neutral set up on the daily chart. This is not surprising given the range bound behavior the pair has been experiencing in recent weeks. Until either side can generate enough momentum to provide significant follow through, expect the choppy trading conditions to continue.

Source: EUR/USD Looking To Maintain Ground Above $1.3000