EUR/USD bears attack 0.9950 ahead of US Durable Goods Orders, Jackson Hole

EUR/USD reverses the previous day’s corrective pullback as it takes offers to renew the intraday low near 0.9950 during Wednesday’s Asian session. In doing so, the major currency pair portrays the market’s rush towards the US dollar in search of risk safety ahead of top-tier data/events. Also keeping the pair sellers hopeful is the hawkish Fedspeak.

That said, the US Dollar Index (DXY) poked the multi-year high the previous day before reversing from 109.27. That said, the fears of economic slowdown and the US Federal Reserve’s (Fed) aggressive rate hikes are the main factors that favor the DXY bulls even if the latest weakness in the US data triggered the quote’s pullback. Also likely to have favored the EUR/USD buyers were the mixed numbers from the bloc.

The preliminary readings of the US S&P Global Manufacturing PMI for August eased to 51.3 versus 52.0 expected and 52.2 prior while the Services gauge plunged to 44.1 from 47.3, compared to 49.2 market forecasts. According to S&P Global, the US economy is also in trouble as the Composite PMI shrank to 45, its lowest in 27 months. Furthermore, the US New Home Sales for July dropped to the lowest levels in six years, to 0.511M from 0.585M prior and 0.575M market forecasts. Furthermore, the US Richmond Fed Manufacturing Index for August dropped to -8.0 compared to the 0.0 previous reading.

On the other hand, Preliminary readings of August month Manufacturing PMIs improved in Germany and Europe, despite signaling contraction, whereas the Services gauge eased further during the stated month. That said, the German Manufacturing PMI rose to 49.8 versus 48.2 expected and 49.3 prior while the activity index for the bloc crossed 49.00 market consensus with 49.7 figure compared to 49.8 prior reading. Further, Germany’s Services PMI eased to 48.2 from 49.7 previous readouts and 49.0 expected whereas the Eurozone Services gauge dropped to 50.2 versus 50.5 market forecasts and 51.2 prior. Additionally, the flash reading of the Euro area Consumer Confidence Indicator rose to -24.9 in August from July's record low of -27. This reading came in better than the market expectation of -28.

It should be noted that Minneapolis Fed President Neel Kashkari recently mentioned, "The biggest fear is that we are misreading underlying inflation dynamics," per Reuters. The policymaker also added that the Fed can relax on rate hikes when compelling evidence of CPI heading toward 2% seen.  Alternatively, European Central Bank (ECB) executive board member Fabio Panetta said on Tuesday that they may have to adjust the monetary policy further, as reported by Reuters. ECB’s Panetta also acknowledged that the probability of a recession in the eurozone was increasing and added that a recession would mitigate inflation pressures. Before that, Bundesbank President, as well as the European Central Bank (ECB) policymaker, Joachim Nagel mentioned that the ECB must keep raising interest rates even if a recession in Germany is increasingly likely, as inflation will stay uncomfortably high all through 2023.

Amid these plays, US 10-year Treasury yields rose to the highest in a month, inactive at around 3.05% by the press time, whereas Wall Street benchmarks closed with mild gains. It’s worth noting that the S&P 500 Futures print mild losses by the press time.

Moving on, the US Durable Goods Orders for July, expected 0.6% versus 2.0% prior, will be important to watch for the EUR/USD pair traders for fresh impulse. However, major attention should be given to Friday’s speech by Fed Chairman Jerome Powell at the Kansas City Fed’s symposium in Jackson Hole.

Technical analysis

Unless providing a daily close beyond the two-week-old descending resistance line, around 1.0055 by the press time, EUR/USD prices remain on the bear’s radar. That said, the 61.8% Fibonacci Expansion (FE) of the pair’s moves between late May and early August, around 0.9850, seems to lure the short-term sellers.