EUR/USD grinds lower around 1.1800 as busy calendar week starts
|- EUR/USD holds onto Friday’s downbeat performance around monthly low.
- US Dollar Index differs from weaker Treasury yields.
- Fed tapering concerns join headlines from China, Iran to challenge traders amid a sluggish session.
- US consumer-centric data will be the key ahead of next week’s FOMC.
EUR/USD remains pressured around the 1.1800 threshold, down 0.08% intraday heading into Monday’s European session.
The major currency pair failed to stay positive amid a sluggish session as chatters over Fed tapering supersede mixed clues from elsewhere, underpinning the US dollar’s safe-haven demand. Even so, traders remain cautious ahead of the key week and battle strong support confluence by the press time.
Having seen the firmer Producer Price Index (PPI) the previous day, Philadelphia Federal Reserve Bank President Patrick Harker becomes another Fed member to back the tapering. The policymaker recently said, during a Nikkei interview, “I am supportive of moving toward a tapering process sooner rather than later. When exactly that happens, the committee needs to decide. I would hope sometime this year we would be able to start the tapering process.”
Also favoring the greenback’s safe-haven demand are chatters over Typhoon Chanthu in China and the coronavirus woes that fail to recede.
On the positive side, US stimulus, Iran and the easing of the Sino-American tussles join the vaccine optimism to cite the positive catalysts. US Democrats are up for easing their previous demands to push forward President Joe Biden’s $3.5 trillion stimulus. Biden’s six-pronged strategy and the US-China talks after multiple months of silence favor market sentiment and commodity prices. Additionally, the International Atomic Energy Agency (IAEA) Chief Rafael Grossi recently visited Tehran and returned with the good news of striking a deal with Iran to solve "the most urgent issue" between them.
Amid these plays, S&P 500 Futures print mild gains, snapping a five-day downtrend whereas the US 10-year Treasury yields remain pressured around 1.34% amid indecision and skepticism ahead of the key US data.
Having witnessed downbeat US jobs report and PPI, this week’s inflation figures and Retail Sales will be crucial to determine the Fed’s next moves. Should the numbers arrive as strong, tapering concerns will strengthen, which in turn will please EUR/USD bears.
Technical analysis
A confluence of 50-DMA and 23.6% Fibonacci retracement (Fibo.) of the May-August downside puts a floor under the EUR/USD weakness targeting July’s low near 1.1750. Even so, bulls remain cautious unless witnessing a daily closing past 1.1910 double-top level.
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