- EUR/USD remains indecisive after testing the bears of late.
- Mixed concerns, pullback in US Treasury yields and the DXY keep traders on their toes.
- Germany’s ZEW Sentiment data for May, central bankers’ comments can offer immediate directions.
- Wednesday’s key US inflation, speech from ECB’s Lagarde could infuse volatility.
EUR/USD stays defensive around mid-1.0500s as global markets consolidate recent moves during Tuesday’s Asian session, following a stellar show of risk-aversion the previous day. The major currency pair’s latest indecision could be linked to anxiety ahead of the key data/events, as well as the recently mixed macro headlines and comments from central bank policymakers.
Growing concerns over the surging inflation’s negative impact on economic growth and the central bankers' struggle to maintain the inflation and growth system triggered the risk-off mood on Monday. Not only the grim growth outlook but downbeat prints of Eurozone Investor Confidence, -22.6 for May versus -20.8 expected and -18 prior, also weighed on the EUR/USD prices the previous day.
However, mixed comments from the Fedspeak and downbeat prints of the US inflation expectations seem to have probed the bears afterward. Despite witnessing extra pressure to support 75 basis points (bps) of a rate hike, Atlanta Fed’s Raphael Bostic promoted a series of 50bps rate lifts. On the other hand, Richmond Fed President Thomas Barkin kept the 75 bps rate hike on the table. That said, the US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, dropped the most in 10 months to retest early March levels by the end of Monday’s North American trading session.
Also likely to have eased the pessimism are comments from China’s Vice Premier Liu He who reiterates the country’s dynamic covid zero policy.
Amid these plays, the US 10-year Treasury yields drop six basis points (bps) to flirt with the 3.0% level, extending the previous day’s pullback from a three-year high, whereas the S&P 500 Futures drop 0.20% while poking the yearly low around 3,965 by the press time.
Looking forward, Germany’s ZEW Survey data for Economic Sentiment and Current Situations for May will be eyed for immediate directions. Following that, comments from ECB Vice-president Luis De Guindos and some Fed speakers will be in focus. However, major attention will be given to risk catalysts and the US Consumer Price Index (CPI) data for April.
Technical analysis
A bear flag troubles EUR/USD traders between 1.0490 and 1.0650 as steady RSI and sustained trading below the key resistances, namely 100-SMA and a downward sloping trend line from March 31, keep sellers hopeful.
Also read: EUR/USD Price Analysis: Bear flag remains in play around 1.0550
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.