EUR/USD licks its wounds at six-week low under 1.0900 as Fed minutes, yields propel US Dollar

EUR/USD bears take a breather at the lowest level in six weeks while seeking fresh clues to extend the previous day’s fall amid early Thursday morning in Asia. That said, the Euro pair refreshed the multi-day low to 1.0871 late Wednesday after the Monetary Policy Meeting Minutes of the Federal Open Market Committee (FOMC) appeared hawkish. Also weighing on the pair was the major US Dollar strength backed by the firmer US Treasury bond yields and sour sentiment, not to forget mostly upbeat US data.

The late Fed Minutes showed the FOMC members’ division about the rate hike trajectory but marked union when it came to the inflation fears, which in turn appeared hawkish and favored the US Dollar. “Federal Reserve officials were divided over the need for more interest rate hikes at the U.S. central bank's July 25–26 meeting, with ‘some participants’ citing the risks to the economy of pushing rates too far even as ‘most’ policymakers continued to prioritize the battle against inflation,” said Reuters.

That said, the US Industrial Production marked a surprise 1.0% growth for July versus 0.3% expected and -0.8% prior while the Capacity Utilization for the said month also improved to 79.3% from 78.6%, compared to market forecasts of 79.1%. Further, the Building Permits edged higher to 1.442M for July from 1.441M whereas the Housing Starts rose to 1.452M for the said month versus 1.398M prior and 1.448M expected. It’s worth noting that both the
Building Permits Change and Housing Starts Change improved more than market forecasts and previous readings. Previously, the US Retail Sales grew 0.7% MoM in July versus 0.4% expected and 0.3% reported in June (revised from 0.2%) and suggested strong consumer spending, mainly due to improved wages, which in turn favored the US Dollar to stay firmer amid early weekdays.

On the other hand, Eurozone Industrial Production for June marked an unexpected growth of 0.5% MoM versus -0.1% market forecasts and 0.0% previous readings. On the same line, the yearly Industrial Output figures improved to -1.2% YoY from -2.5% marked in May, versus -4.2% anticipated. Further, the second readings of the Eurozone Gross Domestic Product (GDP) for the second quarter (Q2) confirmed the 0.3% QoQ and 0.6% YoY initial estimations but the first readings of the Employment Change eased for the said period.

It’s worth mentioning that the growing fears from China and the chatters about the softer growth in developed economies, backed by the global rating agency Fitch Ratings, weigh on the sentiment and allowed the US Dollar to remain firmer at the highest level in a month.

Against this backdrop, Wall Street closed in the red and the US 10-year Treasury bond yields refreshed their yearly high during the five-day uptrend.

Moving on, a light calendar may allow the Euro pair to consolidate the latest moves but that needs validation from the Eurozone trade numbers, US weekly jobless claims and Philadelphia Fed Manufacturing Survey, not to forget the aforementioned risk catalysts.

Technical analysis

A sustained downside break of the 100-DMA, around 1.0935 by the press time, directs EUR/USD toward an ascending support line stretched from November 2022, close to 1.0830 amid bearish MACD signals. That said, the RSI conditions prod the Euro pair’s downside afterward.