EUR/USD may cheer upbeat China data ahead of Eurozone CPI and US retail sales release

• Upbeat China data and the resulting risk-on in equities could bode well for the EUR.
• The gains, however, could be short-lived, if the Eurozone CPI misses estimates and US retail sales blow past expectations, lifting Treasury yields.

The bid tone around the shared currency could strengthen in Europe, courtesy of upbeat China data and trade optimism.

The manufacturing Purchasing Manager's Index (PMI), which surveys state-owned enterprises,  reached 50.5 in March, rising 1.3 percentage points compared to the previous month, the National Bureau of Statistics (NBS) reported on Sunday.

Further, the Caixin PMI, which focuses on the small and medium-sized export-oriented units, rose to 50.8 in March from the previous month's print of 49.9.

The upbeat forward-looking PMI numbers could alleviate fears of a deeper slowdown in the world's second-largest economy. Stocks have already picked up a bid with the Shanghai Composite currently trading at the highest level since May and the EUR will likely follow suit, as China is one of Germany's top export market.

Any gains to 1.1250 or above, however, could be erased if the preliminary Eurozone consumer price index (CPI), due for release at 09:00 GMT, prints well below estimates, validating the ECB's recent dovish turn. The cost of living is expected to have risen 0.9 percent year-on-year in March, following a 1 percent rise in February.

Post-Eurozone data, the focus would shift to the US retail sales and ISM manufacturing. An uptick in spending, as represented by retail sales and the employment sub-index of the ISM number will likely put a strong bid under the greenback.

Apart from economic data releases, the pair may also take cues from the big moves in EUR/GBP, if any,  after the UK parliamentary vote on Brexit.

Technically speaking, a corrective bounce looks overdue as signs of bearish exhaustion have emerged in the form of doji candle on the daily chart and the bullish divergence of the relative strength index (RSI) on the 4-hour chart.

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