EUR/USD skates on thin ice near 1.0700, EU/US Consumer Confidence, US default jitters in focus
|- EUR/USD prods 10-week low as bears keep reins for sixth consecutive day despite latest zigzag.
- Market sentiment dwindles as optimism surrounding US debt ceiling deal fades amid policymakers’ discomfort with compromises.
- Hawkish ECB talks fail to inspire Euro buyers amid fears of German recession, comparatively more optimistic Fedspeak.
- Eurozone, US consumer sentiment data, headlines about US debt ceiling deal will join ECB officials’ speeches to direct intraday moves.
EUR/USD remains depressed at 10-week low surrounding the 1.0700 threshold heading into Tuesday’s European session.
The Euro pair stays on the back foot for six days in a row amid hawkish Federal Reserve (Fed), as well as doubts about the European Central Bank’s (ECB) capacity to lift the rates further. Also exerting downside pressure on the major currency pair is the latest shift in the market sentiment as traders struggle to cheer the US policymakers’ agreement on the debt ceiling extension to January 2025 ahead of the House and Senate voting on the bill prior to the June 05 US default date.
The previous week’s downbeat German growth figures renew concerns about the old continent’s economic slowdown and pushed back the hawkish ECB bets even if the policymakers keep citing higher inflation woes and defend the tighter monetary policy. Among them, ECB Policymaker Pierre Wunsch was the latest who said on Saturday, “We hiked 400bp and we might have to do more.”
Apart from that, Spanish Prime Minister (PM) Pedro Sanchez announced snap elections in July while Greek President is up for appointing a caretaker PM ahead of a repeat election on June 25, which in turn flags geopolitical fears in the bloc and weighs on the EUR/USD prices.
On the other hand, traders struggle to cheer the successful negotiations to avoid the US default as some of the US policymakers, mostly Republicans, are against the compromises made to their previous demands to reach the deal. The policymakers also show readiness to challenge the agreement in the House, as well as in the Senate, which in turn prods the market’s previous risk-on mood and keeps the US Dollar on the front foot.
Against this backdrop, the US stock futures print mild gains but the Treasury bond yields remain pressured and challenge the US Dollar Index (DXY) bulls as the greenback’s gauge versus the six major currencies seesaws around a nine-week high.
Looking forward, Eurozone Consumer Confidence and the US Conference Boards’ (CB) Consumer Confidence data for May will offer immediate directions to the EUR/USD pair traders. However, Wednesday’s US House voting on the debt-ceiling agreement, Thursday’s Eurozone inflation data and the Senate’s approval for the same before June 05, as well as Friday’s US jobs report, become the key to watch for a clear guide.
Technical analysis
EUR/USD bears are likely to keep the reins unless crossing a one-month-old descending resistance line, close to 1.0725 by the press time. However, an upward-sloping support line from late November 2022, near 1.0700 at the latest, precedes the 200-day Exponential Moving Average (EMA) of around 1.0685 to limit the Euro pair’s short-term downside amid nearly oversold RSI (14) line.
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