EUR/USD defends 1.1290 breakout as yields portray ECB victory over Fed hawks

• EUR/USD picks up bids around monthly high after early Asian pause to two-day uptrend.
• Yields, stock futures remain pressured as Omicron fears, China headlines join geopolitical news amid inactive session.
• ECB’s measured approach got more accolades than Fed’s smart move.
• German IFO data, Eurozone CPI will precede Fed’s Waller but it’s likely a quiet end to the busy week.

EUR/USD consolidates the early Asian session losses while picking up bids to 1.1335 during early Friday morning in Europe.

The major currency pair cheered the European Central Bank’s (ECB) cautiously optimistic moves and has recently been favored by downbeat US Treasury yields that weigh on the US dollar.

It’s worth noting that the latest weakness in the US Treasury yields, down for the second consecutive day, could be linked to the market’s rush for the US Treasury bonds in search of safe returns. In doing so, investors ignore the Fed’s hawkish move while observing the recent risk-off mood backed by the headlines concerning the South African covid variant, China and US stimulus.

Markets aren’t convinced by French President Emmanuel Macron’s comments saying, “I will make COVID-19 decisions based on hospitalizations,” per Reuters. The reason could be linked to the all-time high in the UK’s daily covid infections, recently up by 88,376. Following that, a few of the European countries have announced precautionary measures when it comes to travel links with Britain.

Elsewhere, Australia marks the covid vaccination milestone of 80% but the recent spread in virus variant pushes authorities to introduce tougher activity restrictions in Queensland. Further, US President Biden earlier mentioned that Omicron is going to start spreading more rapidly.

On a different page, the US Senate that rejected a Democratic proposal over immigration, which in turn stopped the President’s BBB aid package. Even so, Biden sounds optimistic to get the much-awaited stimulus passed soon. Additionally weighing the sentiment pair were comments from the Chinese Ambassador who conveyed dislike for the US actions against Chinese entities over Xinjiang-related issues. However, Reuters’ news conveying the US policymakers’ indecision over the restrictions on China company failed to recall the buyers.

ECB won

The European Central Bank (ECB) marked hawkish performance by signaling an end to the Pandemic Emergency Purchase Program (PEPP) in March 2022, also expanding the Assets Purchase Program (APP) to €40 billion per month in Q2 and €30 billion in Q3 2022.

On the contrary, the US Federal Reserve (Fed) announced a doubling of the tapering and hinted at three rate hikes in 2022 but couldn’t help the US Dollar Index (DXY), down 0.03% intraday around 95.96.

Amid these plays, US Treasury yields remain pressured while the S&P 500 Futures drop 0.20% intraday by the press time.

Moving on, revision of the Eurozone Consumer Price Index for November and German IFO figures for December will entertain EUR/USD traders. Following that, comments from Christopher J. Waller is a member of the Board of Governors of the Federal Reserve System, will be eyed.

Technical analysis

A clear upside break of the seven-week-old falling trend line, near 1.1290, directs EUR/USD buyers to the 200-SMA hurdle around 1.1360. However, a horizontal region comprising multiple tops marked since mid-November, close to 1.1380-85, will challenge the bulls afterward.