EUR/USD: A tad lower to 1.1300 as yields underpin USD rebound

EUR/USD drops back to 1.1300, following the previous day’s corrective pullback heading into Monday’s European session. In doing so, the major currency pair drops 0.20% intraday while staying inside a short-term bearish chart formation at the latest.

The indecision over the next moves of the European Central Bank (ECB) and the US Federal Reserve (Fed) seems to restrict the EUR/USD prices of late. While the Market News Internation (MNI) cited sources to confirm further easy money policies at the ECB, Reuters’ poll eyes a reduction in the bond purchase from April. Adding to the confusion was ANZ report saying, “The ECB is expected to boost its monthly APP purchases as part of the transition from PEPP from next April onwards. It is expected that the ECB’s inflation forecast will show inflation below target in 2023, justifying guidance that rates won’t rise next year.”

On the other hand, the Fed hawks were recently poked by the US Consumer Price Index (CPI) data that matched 6.8% market forecasts to refresh the 39-year high. Also testing the Fed policymakers were stable inflation expectations revealed via the University of Michigan Consumer Sentiment Index, to 70.4 for December.

Above all, fears emanating from the South African covid variant, dubbed as Omicron, join financial market woes from China to put a floor under the US dollar and Treasury yields.

That said, the US 10-year Treasury bond coupons print mild gains of around 1.49% whereas the S&P 500 Futures rise 0.36% by the press time.

Given the anxiety ahead of the crucial events, coupled with a light calendar for Monday, the EUR/USD prices are likely to remain pressured amid firmer yields.

Technical analysis

A one-month-old ascending triangle bearish formation restricts short-term EUR/USD moves, between 1.1245 and 1.1380, with bullish MACD signals and a steady RSI line favoring the bulls.