EUR/USD grinds lower towards 1.0600 ahead of Eurozone Retail Sales, focus on Fed Chair Powell, US NFP

• EUR/USD struggles to defend the biggest weekly gains in two months, steadies of late.
• Strong EU data backs hawkish ECB talks and favor Euro buyers amid a light calendar at home.
• Chatters surrounding Fed policy pivot, softer US statistics underpin bullish bias for the major currency pair.
• Fed Chair Powell’s bi-annual testimony, US jobs report for February will be crucial for near-term directions.

EUR/USD retreats to 1.0630, printing mild losses after a notable weekly positive closing, as sour sentiment joins mixed concerns about the European Central Bank (ECB) and the Federal Reserve’s (Fed) next move. It’s worth noting that a light calendar in Asia also tests the pair traders amid a sluggish start to the key week.

That said, hawkish ECB commentary gains support from the strong Eurozone inflation numbers. However, the US data fails to match its European counterpart and challenges the hawkish Federal Reserve (Fed) concerns.

European Central Bank (ECB) Governing Council member Boštjan Vasle said in on Friday, “My personal expectation is that the increase we intend for our March meeting – that is 0.5 percentage points – will not be the last one.” On the same line, ECB Governing Council member Madis Muller said on Friday, “it is probably not the final hike in March.” However, ECB Vice President Luis de Guindos said, “Interest rate path after March will be data-dependent.” Earlier in the day, ECB President Christine Lagarde backed 50 basis points (bps) rate hike in March by citing inflation concerns.

On the other hand, Federal Reserve Bank of Atlanta President Raphael Bostic renewed concerns about the Fed’s policy pivot as the decision-maker said, “The central bank could be in a position to pause the current tightening cycle by mid to late summer.”

On the contrary, San Francisco Federal Reserve Bank President Mary Daly said during the weekend that if data on inflation and the labor market continues to come in hotter than expected, interest rates will need to go higher, and stay there longer, than Fed policymakers projected in December, as reported by Reuters.

Furthermore, US Federal Reserve published a semi-annual Monetary Policy Report on Friday wherein it clearly said, “Ongoing increases in the Fed funds rate target are necessary.” The report also stated that the Fed is strongly committed to getting inflation back to 2%.

Talking about the data, Eurozone inflation numbers, namely the Producer Price Index and the Harmonized Index of Consumer Prices (HICP) printed strong figures for February and hence authenticated the ECB policymakers’ hawkish tone, which in turn allows the EUR/USD to remain firmer. The US data, however, fails to impress US Dollar despite the first US Treasury bond yields, which in turn weigh on the Euro pair. That said, the US ISM Services PMI for February came in as 55.1 versus 54.5 market expectations and 55.2 market forecasts. Previously in that week, the US Durable Goods Orders for January eased while the Conference Board’s (CB) Consumer Confidence also flashed mostly downbeat details.

Apart from the EU-US catalysts, headlines from China’s annual session of the National People's Congress (NPC) appear important and recently weigh on the risk profile, as well as the EUR/USD price. As per the latest update, the dragon nation eyes a modest growth of 5.0%, versus market expectations of 6.0%, for the current year. Furthermore, fears from China and Russia also probe the sentiment and weigh on the EUR/USD prices.

Above all, the cautious mood ahead of Federal Reserve (Fed) Chairman Jerome Powell’s half-yearly Testimony and the US employment report for February, as well as today’s Eurozone Retail Sales for February, restrict immediate moves of the EUR/USD pair. Adding importance to today's economic calendar is the US Factory Orders for January. Should the bloc’s data match upbeat expectations of 1.9% YoY, versus -2.8% prior, the quote may reverse the latest losses.

Technical analysis

Despite a sustained bounce off the 200-day Exponential Moving Average (EMA), currently around 1.0535, the EUR/USD rebound needs validation from the 1.0655-60 resistance confluence comprising 50-EMA and three-week-old resistance line to convince buyers.