EUR/USD bulls approach 0.9900 amid sluggish DXY, hawkish hopes from ECB

• EUR/USD grinds higher around two-week top, prints four-day uptrend.
• Downbeat PMIs couldn’t derail upside momentum amid hopes of getting hints over ECB’s QT and 75 bps rate hike.
• US dollar struggles to rebound amid absence of Fed speakers, cautious optimism in the market.
• Second-tier data may entertain buyers ahead of ECB, US Q3 GDP.

EUR/USD bulls attach the 0.9900 threshold as they poke the fortnight top while staying firmer for the fourth consecutive day to early Tuesday in Asia. The major currency pair’s latest gains could be linked to the recently soaring hawkish bets surrounding the European Central Bank (ECB) monetary policy decision, up for this Thursday, despite the latest mixed data. It should be noted, however, that the recent geopolitical chatters seemed to challenge the upside moves. Still, the pre-Fed silence of the US central bank policymakers allowed the quote to remain firmer amid cautious optimism in the market.

Recently, Bloomberg came out with the news suggesting that the European Union (EU) warned the UK and Switzerland to support the bloc’s gas price cap to make it effective. “The bloc’s executive arm is advising EU members that such a price limit would have to be extended to power-importing countries like the UK or Switzerland for it to be effective, the person added,” said the news.

As per the first readings of Eurozone S&P Global PMIs for October, the Manufacturing activities’ gauge dropped to 46.6 versus 47.8 expected and 48.4 prior while its services counterpart matched 48.2 market forecasts versus 48.8 previous readings. Even so, the Composite PMI for the said month declined to 47.1 compared to 47.5 anticipated and 48.1 prior. On the same line, Germany’s S&P Global/BME PMIs for October also marked dismal prints of Manufacturing and Composite indices but signaled an improvement in Services PMI.

On the other hand, the US S&P Global PMIs for October suggest that the Manufacturing activities’ gauge dropped to 49.9 versus 51.2 expected and 52.0 prior while its services counterpart slid to 46.6 from 49.3 previous reading and 49.2 market forecasts. With this, the Composite PMI for the said month declined to 47.3 compared to 49.1 anticipated and 49.5 prior.

Other than the downbeat data and fears surrounding the bloc’s gas price cap on Russian output, the hawkish bets on the ECB and the Fed’s next move also challenged the EUR/USD buyers. However, the absence of Fed speakers, firmer prints of Germany’s Services PMIs, and hopes of the earlier Quantitative Tightening (QT) from the ECB than the Fed appears positive for the EUR/USD.

Against this backdrop, Wall Street closed with gains while the US Treasury yields also ended the day on the positive side after a downbeat start. That said, the S&P 500 Futures remain mildly bid while the US Treasury yields grind higher amid a lackluster market session.

Moving on, EUR/USD traders may witness a lack of major move ahead of the ECB and the US Gross Domestic Product for the third quarter (Q3), scheduled for release on Thursday. However, the market’s cautious optimism allows the quote to remain mildly bid as it pokes the short-term key resistance.

Technical analysis

A downward-sloping resistance line from early June around 0.9900 appears to be the key hurdle for the EUR/USD bulls before they challenge the monthly top near the parity level. Alternatively, the pullback moves remain elusive beyond the one-month-old trend line support, close to 0.9700 at the latest.