EUR/USD clings to 1.1300 amid Fed vs. ECB chatters, US inflation eyed
|- EUR/USD grinds higher amid inactive Asian session after the heaviest fall in fortnight.
- Concerns over ECB’s extended bond purchase escalate versus likelihood of Fed’s faster tapering, more rate hikes.
- Yields snap three-week downtrend as traders await US CPI.
- ECB’s Lagarde, US Michigan Consumer Sentiment Index important too.
EUR/USD pares recently losses around 1.1300 during a sluggish Asian session on Friday.
The major currency pair dropped the most in two weeks the previous day as talks over the European Central Bank’s (ECB) support for extended easy money policies turned virus. Also exerting downside pressure on the quote was the risk-off mood amid mixed concerns and fears of hawkish Fed ahead of today’s US Consumer Price Index (CPI).
Following Bloomberg’s update suggesting that the ECB is up for tweaking the Pandemic Emergency Purchase Programme (PEPP) plan, Reuters said, “ECB policymakers leaning towards temporary, limited Asset Purchases Programme (APP) boost.” The news joins the return of the virus-led activity restrictions in the block to weigh on the regional currency.
On the contrary, the US Dollar Index (DXY) cheered from the market’s fears that the US Federal Reserve (Fed) can taper faster and announce more rate hikes amid firmer data and comparatively more challenges to inflation. Reuters cited the Biden administration signaling a higher price pressure while the US Initial Jobless Claims prints, the lowest since 1969, favored the hawkish hopes from the US central bank.
It’s worth noting, however, that the cautious optimism over Omicron vaccines and easing of the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, seems to challenge EUR/USD bears of late.
Amid these plays, the US Treasury yields and the Wall Street benchmarks posted losses the previous day, portraying the risk-off mood, while the latest corrective pullback in both the risk barometers can’t be taken for the market’s optimism.
Moving on, final readings of Germany’s Harmonized Index of Consumer Prices for November, expected to remain unchanged at 6.0% YoY, will precede a speech from ECB President Christine Lagarde to entertain the EUR/USD traders. However, major attention will be given to the US consumer-centric data, namely the CPI and Michigan Consumer Sentiment Index.
Read: US Consumer Price Index November Preview: Inflation is the new cause celebre
Should the Fed versus ECB drama escalates, which is more likely, the EUR/USD will be vulnerable to refresh yearly low.
Technical analysis
Bullish MACD signals and firmer RSI favor the buyers but 21-day EMA, around 1.1340, acts as an immediate hurdle to recovery moves. Alternatively, a downside break of the three-week-old ascending triangle’s support, at 1.1240 by the press time, will initially attack the yearly low of 1.1186 during the theoretical slump towards 1.1050.
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