EUR/USD battles key resistance around 1.1650 as DXY pokes three-week low

• EUR/USD remains on the front foot at three-week high.
• DXY drops for sixth day despite firmer US Treasury yields.
• EU CPI, Fed/ECB policymakers’ comments eyed for fresh impulse.

EUR/USD stays firmer around 1.1650, up 0.11% intraday heading into Wednesday’s European session. The major currency pair jumped to the highest level since late September the previous day before easing from 1.1669.

In doing so, the quote failed to cross a downward sloping trend line, previous support, from March 31. However, the bulls keep the reins amid the softer US dollar amid a quiet session in Asia.

US Dollar Index (DXY) fades rebound from a three-week low, flashed on Tuesday, by dropping back to 93.70 at the latest. The greenback gauge prints a six-day downtrend while ignoring firmer Treasury yields. That being said, the US 10-year Treasury yields step back from the highest since late May while printing 1.8 basis points (bps) of an upside to 1.652% by the press time.

While comments from the European Central Bank (ECB) chief economist Philip Lane could be linked to the EUR/USD pair’s pullback from the multi-day high the previous day, Fed Governor Christopher Waller renewed tapering concerns but couldn’t recall DXY bulls. The same help the currency pair bears to remain hopeful.

ECB’s Lane said, t is challenging to reconcile the market rate pricing with forward guidance, as reported by Reuters. On the other hand, Fed’s Waller mentioned, “If inflation keeps rising at its current pace in coming months rather than subsiding as expected, Federal Reserve policymakers may need to adopt ‘a more aggressive policy response’ next year.” Additionally, Reuters’ latest poll of economists cites the risk of an earlier rate hike by spotting the reflation fears. It should be noted that the downbeat US housing data and worsening of the construction activity in the Eurozone challenge the rate hike concerns.

Even so, concerns over the US stimulus being nearby and hopes of overcoming the China-linked fears seem to underpin the risk-on mood, weighing on the US dollar’s safe-haven demand.

That said, the final reading of the Eurozone Consumer Price Index (CPI) for September, expected to rise from 0.4% to 0.5%, will join Germany’s Producer Price Index (PPI) for the stated month, likely rising to 12.7% from 12.0% prior, to direct immediate EUR/USD moves. However, major attention will be given to the comments from the ECB and the Fed officials’ statements, lined up for release during the day.

Technical analysis

A daily closing beyond the support-turned-resistance line from March 31, around 1.1650, becomes necessary for the EUR/USD bulls to aim for a 50-DMA level surrounding 1.1715. Failures to do so can drag the quote back to the 21-DMA level of 1.1617.