- EUR/USD struggles to extend three-month downtrend around nearly two-decade low.
- Markets turned dicey but hawkish central bankers, firmer EU inflation data kept bears in driver’s seat.
- Geopolitical, covid news also exerted downside pressure ahead of the key US data.
- German Retail Sales, US ISM Manufacturing PMI could offer intraday directions.
EUR/USD seesaws around 1.0050, probing a three-day rebound from the yearly low after declining for three consecutive months. The pair’s latest inaction could be linked to the anxiety ahead of the critical data/events, while the daily gains could be attributed to the hawkish EU data versus softer US numbers. Even so, hawkish Fed bets and fears of recession kept the quote pressured.
As per the first readings of the Eurozone Harmonised Index of Consumer Prices (HICP) released for August, the inflation in the bloc rose to 9.1% YoY versus 9.0% expected and 8.9% prior. On Tuesday, Germany’s HICP for the stated month grew 8.8% while matching expectations, versus 8.5% prior.
Following the data, the European Central Bank (ECB) “urgently needs to act decisively next week,” the central bank’s Governing Council member and German central bank head Joachim Nagel said on Wednesday. “We need a strong rate hike in September,” the policymaker added.
Additionally, Germany’s Chancellor Olaf Scholz said the government would present the next relief package soon.
On the other hand, US ADP Employment Change rose by 132K versus 288K expected and 270K prior. However, the average wage increases in the US in August were 7.6% y/y and kept the Fed policymakers hawkish.
Cleveland Federal Reserve Bank President Loretta Mester said on Tuesday that she was not anticipating the Fed to cut rates next year, as reported by Reuters. The policymaker also stressed that inflation must be controlled, even if it means a recession. Restoring stability to consumer prices is now the clear priority for many key central banks, and with inflation so strong, that will come at the expense of growth.
It should be noted that the energy crisis in Germany and the fears of the US-China tussles, recently over Taiwan, join covid woes in China to underpin the US dollar’s safe-haven demand.
Amid these plays, Wall Street closed with losses while the US 10-year Treasury yields rose the most in two weeks while rising to the highest level since late June.
Moving on, Germany’s Retail Sales for August and the US ISM Manufacturing PMI could entertain the EUR/USD traders ahead of Friday’s US Nonfarm Payrolls (NFP).
Also read: US ISM Manufacturing PMI Preview: Slowing growth or recession?
Technical analysis
Although 0.9900 puts a short-term floor under the EUR/USD prices, July’s low near the 1.000 threshold precedes a downward sloping trend line from February, near 1.0190, to restrict the pair’s upside momentum.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold drops below $2,320 as US yields shoot higher
Gold lost its traction and turned negative on the day below $2,320 in the American session on Thursday. The benchmark 10-year US Treasury bond yield is up more than 1% on the day above 4.7% after US GDP report, weighing on XAU/USD.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.