EUR/USD pares intraday losses near 1.0250, Fed Minutes, EU recession in focus

EUR/USD licks its wounds as traders brace for the long week during early Monday morning in Europe. Even so, the major currency pair remains down for the second consecutive day while keeping eyes on this week’s Federal Open Market Committee (FOMC) meeting minutes, as well as chatters surrounding the Eurozone recession.

The quote’s latest rebound could be linked to the US Dollar Index (DXY) retreat from its intraday high. The greenback’s gauge recently eased from the daily top on headlines suggesting the resumption of the Russian bonds’ trading on Wall Street. Also favoring the market’s cautious optimism were headlines suggesting improved coronavirus conditions in China's financial hub Shanghai.

However, fears surrounding the Eurozone recession, mainly led by the German energy crisis, challenge the market’s sentiment. On the same line could be the hawkish Fedspeak, despite recently softer inflation data from the US.

On Friday, Richmond Federal Reserve (Fed) Bank President Thomas Barkin said that he wants to raise interest rates further to bring inflation under control. "I'd like to see a period of sustained inflation under control, and until we do that I think we are just going to have to move rates into restrictive territory," Barkin told CNBC, per Reuters. His comments rolled out after the firmer US Michigan Consumer Sentiment Index (CSI) for August edged higher to 55.1 (flash) from 51.5 in July and the market expectation of 52.5. Further details revealed that the one-year-ahead inflation expectations fell to a six-month low of 5.0% from 5.2%, while the five-year inflation outlook edged up to 3.0% from 2.9%.

Elsewhere, Klaus Mueller, head of the Bundesnetzagentur (BNA) regulator told the Financial Times (FT) that Germany reached the 75 percent goal two weeks ahead of schedule, as gas saving measures and high prices led to reduced use. The energy regulator, however, also said the next two milestones were “much more ambitious”.

It’s worth noting that the mixed updates surrounding the US-China tussles and the Biden-Xi meeting also keep a tab on the EUR/USD prices amid the sluggish session.

Against this backdrop, the US 10-year Treasury yields remain pressured at around 2.83 after posting weekly losses by the end of Friday. Further, S&P 500 Futures print 0.25% intraday losses while Japan’s Nikkei 225 rises 2.65% on a day by the press time. It’s worth noting that Wall Street rallied on Friday.

Looking forward, today’s NY Empire State Manufacturing Index for August, expected 8.5 versus 1.1 prior, may offer immediate directions to the EUR/USD pair traders. However, Germany’s ZEW Economic Sentiment, the second reading of the Eurozone Q2 GDP and the Fed Minutes will be more important for the pair traders to observe.

Technical analysis

A convergence of the 100-SMA and 200-SMA, as well as an upward sloping trend line from mid-July, constitutes strong support for the EUR/USD pair traders to watch around 1.0210 level.

That said, recovery moves need validation from the monthly peak near 1.0370 to retake control.