EUR/USD eases below 1.1700, Fed-ECB, Evergrande and US debt limit eyed

EUR/USD fades bounce off the yearly low, recently easing to 1.1685 heading into Wednesday’s European session. The major currency pair dropped during the last three days before the bears take a breather amid mixed clues, waiting for the key catalysts.

Unlike the indecision over the European Central Bank’s (ECB) next moves, per the policymakers’ comments, the US Federal Reserve (Fed) officials back the imminent tapering of bond purchases.

From the ECB, President Christine Lagarde and Governing Council member, as well as the Bank of France Head, Francois Villeroy de Galhau tried to placate reflation fears and defend easy money policies. However, the Governor of the Bank of Slovakia and the ECB member Peter Kažimír said, “The bank may not necessarily increase bond-buying via the APP program.” On the other hand, St. Louis Federal Reserve President James Bullard copied the tunes of Fed Chairman Jerome Powell to reiterate the tapering song.

Elsewhere, US President Joe Biden’s canceled visit to Chicago, to lead negotiations over his legislative agenda, probes the previous risk-off mood amid hopes that the national leader may overcome the deadlock concerning US debt ceiling extension and stimulus package. On the same line was China’s waiver of Intellectual Property (IP) for the covid vaccine.

However, the looming coupon payment of the Evergrande bonds and the US push to China, diplomatically, to cut oil imports from Iran challenge the upbeat sentiment and keep the EUR/USD sellers hopeful.

Amid these plays, S&P 500 Futures rise 0.50% intraday, snapping a two-day fall, whereas the US 10-year Treasury yields seesaw around mid-June highs after rising for five consecutive days. Further, the US Dollar Index (DXY) remains sidelined around the 10-month top as the greenback traders seek fresh clues to break the monotony.

To do so, scheduled speeches from the Fed and the ECB policymakers, including their heads, will be important. Also, headlines concerning the US debt limit and China’s Evergrande could direct the short-term EUR/USD traders as well. On the calendar, monthly releases of the Eurozone Consumer Confidence, Industrial Confidence and Business Climate for September will precede the US Pending Home Sales for August to keep the pair traders busy.

Technical analysis

EUR/USD remains directed towards the yearly low of 1.1664 unless crossing the 1.1715 resistance confluence, comprising 10-DMA and a descending trend line from September 03. During the quote’s weakness past 1.1664, 61.8% Fibonacci Expansion (FE) level of the mid-July to August fall, followed by rebound during early September, near 1.1610 will lure the ears.