- EUR/USD bulls take a breather after rising to one-month high during a two-day uptrend.
- Hawkish ECB speak, mixed US data and repeated Fed comments underpin the run-up.
- Risk-aversion failed to propel the US dollar amid doubts over growth, inflation.
- US Durable Goods Orders for April, German data and risk catalysts are extra burden on the market watchers.
EUR/USD dribbles around a one-month high, after rising for the last two consecutive days to Wednesday’s Asian morning, as the US dollar selling pauses ahead of the key catalyst, as well as amid a risk-off mood. That said, the major currency pair seesaws around 1.0730-35 by the press time.
Fears of slowing housing growth and hawkish comments from the European Central Bank (ECB) officials could be termed as the key factors that recently propelled the EUR/USD prices. On the same line were the repetitive Fedspeak and an absence of impressive data from elsewhere. It’s worth noting that the risk-aversion couldn’t lift the US dollar on downbeat Treasury yields ahead of today’s Minutes of the latest Federal Open Market Committee (FOMC).
US New Home Sales for April marked the biggest monthly fall in nine years with 16.6% MoM figures and sparked concerns over the growth of the world’s largest economy, especially at the time when inflation fears are mounting. The same weighed down the US Treasury yields and the US Dollar Index (DXY) as Fed policymakers keep repeating the 50 bps rate hike concerns. It’s worth noting that the US preliminary activity numbers for May also came in softer and exerted additional downside pressure on the greenback.
That said, the US 10-year Treasury yields dropped the most in a week to refresh a one-month low around 2.717% while the DXY extended the week-start fall towards late April bottom near 101.70. Elsewhere, the Wall Street benchmarks closed mixed, after an initially downbeat performance.
Not only the USD weakness but the economic optimism among the European policymakers and upbeat data from Germany also weighed on the EUR/USD prices. On Tuesday, the European Central Bank (ECB) President Christine Lagarde joined Vice President of the European Commission Valdis Dombrovskis to portray the economic resilience of the bloc. Further, German PMI was firmer for May while the Eurozone numbers were softer-than-expected. It should be noted that some of the ECB policymakers have recently spread direct comments on the 50 bps rate hike in July and offered notable strength to the Euro.
That said, the EUR/USD traders may pay attention to the qualitative catalysts ahead of the European morning and hence a risk-off mood may consolidate some of the pair’s latest gains. However, German GfK sentiment figures, GDP data and a speech from ECB President Lagarde will be crucial to watch afterward. Following that, the US Durable Goods Orders for April and FOMC minutes will be important. Should the US data keep coming softer, the EUR/USD pair will justify the technical breakout to please buyers.
Read: FOMC May Minutes Preview: Will the Fed have to sell MBS?
Technical analysis
A daily closing beyond the previous support line from early March, around 1.0710, directs EUR/USD prices towards the 50-SMA hurdle surrounding 1.0765 ahead of challenging a downward sloping resistance line from February, near 1.0845.
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