EUR/USD clings to 1.1050 on pre-ECB caution, US inflation, Ukraine eyed as well

EUR/USD holds onto the initial losses, down 0.11% intraday while taking rounds to 1.1050 during early Thursday morning in Europe.

The major currency pair printed the biggest daily gain since 2016 the previous day on escalating hopes of a Ukraine-Russia peace agreement. However, mixed headlines and the market’s anxiety ahead of the key data/events, including the European Central Bank (ECB) monetary policy meeting, keep the pair traders on the edge.

Ukraine’s readiness to compromise, if Russia does the same, joined Kyiv’s retreat from the NATO plans and a start of the human corridor to underpin the EUR/USD pair’s run-up on Wednesday. However, Russia’s refrain from conceding anything joins the Biden administration’s argument with Moscow, over the usage of chemical or biological weapons, to weigh on the quote of late.

It’s worth noting that, Eurozone joined the UK and the US to announce fresh sanctions on Russia, due to its invasion of Ukraine the previous day.

Amid these plays, US Treasury yields fail to extend the previous day’s gains and the S&P 500 Futures also struggle to track Wall Street’s strong up-move. However, the US Dollar Index (DXY) prints mild profits as firmer US inflation expectations keep the buyers hopeful at the latest. That said, the inflation gauge, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, refreshed record top to 2.9% before stepping back to 2.84% by the end of Wednesday’s North American trading session.

Moving on, the ECB has to please the markets with something strong to keep the EUR/USD rebound on the table else fears of fresh 2020 bottom can’t be ruled out due to the looming fears of stagflation amid firmer oil prices and negative economic vibes over Russia-Ukraine war. “The European Central Bank is likely to make a few policy commitments as possible on Thursday as the shock of Russia's invasion of Ukraine up-ends its expectations for the economy and leaves policymakers grappling with new realities,” said Reuters ahead of the ECB.

Read: ECB Preview: More pain for the euro as doves may strike back amid Ukraine crisis, stagflation risks

Elsewhere, the US Consumer Price Index (CPI) for February, likely rising to 7.9% from 7.5% prior, will join the Ukraine-Russia talks in Ankara to highlight the importance of Thursday for market players.

Technical analysis

A convergence of the 50-SMA and the resistance-turned-support from February 23, near 1.1030-25, join the bullish MACD to challenge the EUR/USD bears before directing them to the weekly support line near 1.0940.

Alternatively, recovery moves need to cross the recent high of 1.1095 to convince the EUR/USD buyers.