- EUR/USD remains pressured, fades corrective pullback following the heaviest daily slump in 4.5 months.
- Market sentiment dwindles amid Fed tapering chatters, EU-US peace over steel, aluminum.
- US dollar defends Friday’s jump on firmer Treasury yields.
- German Retail Sales, ISM Manufacturing PMI can entertain traders, Wednesday’s Fed meeting becomes the key.
EUR/USD remains sidelined around 1.1550, following the heaviest daily fall since mid-June, heading into Monday’s European session. Having witnessed the European Central Bank’s (ECB) failed attempt to hide hawkish intentions, the market turns towards the US Federal Reserve (Fed) with high hopes of tapering hints.
Steady prints of the Fed’s preferred inflation gauge, the US Core PCE Price Index, bolstered the tapering concerns on Friday, favoring the US Dollar Index (DXY) to rally the most since the mid-June. That said, the data remained firmer around 3.6%, versus a 3.7% market forecast, for September.
On the other hand, the Eurozone GDP returned to the pre-pandemic levels, +2.2% QoQ, during the Q3 and the October month’s inflation also rose 4.1%, firming up odds of the ECB’s next move to be a rate hike than the otherwise. However, the regional central bank has already played its role and the ECB policymakers have recently been searching for clues to avoid any strong bullish action, which in turn allowed the US Dollar to garner the market’s attention and gain.
Elsewhere, the US joins hands with the European Union (EU) over steel and aluminum tariffs to challenge Beijing’s steel industry whereas US President Joe Biden marked “god willing” to portray optimism concerning the Build Back Better framework.
Amid these plays, US 10-year Treasury yields rise 1.6 basis points (bps) to 1.57% while the US Dollar Index (DXY) stays firmer above 94.00 at the latest.
Looking forward, German Retail Sales for September, expected .8% YoY versus 0.4% prior, will precede the US ISM Manufacturing PMI for October, market forecast 60.4 against 61.1, to entertain short-term traders. However, major attention will be on Wednesday’s Fed verdict with eyes on tapering hints.
Technical analysis
The EUR/USD pair’s U-turn from 50-DMA takes clues from the MACD line’s inability to reach the positive region, also tilt southwards before that, to favor the bears. Also signaling the quote’s further weakness is the downside break of three-week-old horizontal support, now resistance around 1.1590.
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