EUR/USD edges up to mid-1.0900s amid softer USD, looks to US macro data for fresh impetus

The EUR/USD pair attracts some dip-buying during the Asian session on Thursday and reverses a part of the previous day's retracement slide from the weekly top. Spot prices currently trade around mid-1.0900s, up just over 0.15% for the day, and draw support from a modest US Dollar (USD) downtick.

Investors now seem convinced that the Federal Reserve (Fed) will start cutting interest rates early next year, which leads to a further decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond drops to its lowest level since July and fails to assist the Greenback to capitalize on Wednesday's upbeat US macro data-inspired gains. Apart from this, a modest recovery in the US equity futures, following the overnight late sell-off, further undermines the safe-haven buck and lends support to the EUR/USD pair.

The shared currency, on the other hand, draws support from reduced bets for early interest rate cuts by the European Central Bank (ECB). In fact, Slovak central bank chief Peter Kazimir said on Monday that any talk of the ECB cutting rates is premature. Echoing the view, ECB policymaker Bostjan Vasle noted that the central bank will need at least until spring before it can reassess its policy outlook and market expectations for an interest rate cut in March or April are premature. This is seen as another factor acting as a tailwind for the EUR/USD pair.

That said, a slew of Fed officials recently tried to push back against expectations that the US central bank will completely pivot away from its hawkish stance in the wake of still-elevated inflation. This, in turn, raises the uncertainty over the timing of when the Fed will begin easing its monetary policy and might help limit losses for the buck. Traders might also refrain from placing aggressive USD bearish best ahead of the release of the US Core PCE Price Index on Friday, which will influence the Fed's future policy decision and provide a fresh impetus.

Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of bullish traders and suggests that the path of least resistance for the EUR/USD pair is to the upside. Market participants now look to the US economic docket, featuring the final Q3 GDP print, the usual Weekly Initial Jobless Claims data and the Philly Fed Manufacturing Index. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and produce short-term trading opportunities later during the early North American session.

Technical levels to watch