EUR/USD rebound approaches 1.0950 even as Fed vs. ECB play lures bulls, ZEW data eyed

EUR/USD renews its intraday high around 1.0940 while licking its wounds amid early Tuesday morning in Europe. In doing so, the Euro pair prints the first daily gains in three by recovering from the lowest levels in a week.

The Euro pair’s latest rebound could be linked to the US Dollar’s retreat while tracking the US Treasury bond yields. Also likely to challenge the EUR/USD bulls is the consolidation ahead of today’s key Eurozone and German ZEW sentiment figures for April.

That said, the US Dollar Index (DXY) retreats to 102.00 as the 10-year and two-year Treasury bond yields snap a three-day uptrend with mild losses around 3.60% and 4.18% by the press time.

Also likely to have lured the EUR/USD pair buyers are the recent chatters that the European Central Bank (ECB) is almost certain to announce a 0.25% rate hike in May, even as policymakers appear divided between the 25 basis points (bps) and 50 bps move. On Monday, ECB policymaker Martins Kazaks said, “The central bank has the option of 25 basis points (bps) or 50 bps move in May.”

It’s worth noting that the latest cautious mood ahead of the US debt ceiling plan, up for publishing on Wednesday, also challenges the US Dollar bulls as the policymakers are divided about the details ahead of the June deadline. Over the weekend, President Christine Lagarde said that she has “huge confidence” the US will not allow the country to default on its debt.

Recently, the upbeat US data propelled the market’s bets on the 0.25% Fed rate hike in May, as well as cut the odds of a rate reduction from the US central bank sometime in late 2023. The same contrast with the ECB policymakers’ indecision and firmer yields to favor the US Dollar.

Amid these plays, S&P 500 Futures remain indecisive even as Wall Street closed with mild gains.

Moving on, Eurozone and Germany’s ZEW Survey data for April will precede the US Housing Starts and Building Permits for March to direct intraday EUR/USD moves. However, major attention will be given to the risk catalysts and central bank talks for clear directions.

Technical analysis

EUR/USD rebounds from a one-month-old ascending support line, around 1.0925 by the press time, but the 10-DMA level surrounding 1.0940 restricts the immediate upside of the Euro pair.