EUR/USD sellers keep the reins below 0.9800 as yields fuel DXY amid hawkish Fed bets

EUR/USD seesaws around intraday low as bears take a breather after the biggest daily fall in two weeks during early Thursday morning in Europe. That said, the major currency pair takes rounds to 0.9760-70 despite picking up bids of late.

The quote’s weakness could be linked to the market’s growing fears of economic slowdown as inflation remains firmer and the central bankers refrain to step back from the hawkish path. Also weighing on the quote could be China’s covid conditions and Russia’s aggression in the fight with Ukraine, as well as the recent Sino-American tensions over Taiwan.

That said, Eurozone Inflation, as per the Harmonised Index of Consumer Prices (HICP) measure, surged 9.9% YoY in September versus 10.0% initial forecasts. Elsewhere, the UK’s Consumer Price Index (CPI) refreshed a multi-year high and price pressure in Canada also remained elevated.

Considering the data, policymakers from Europe and the US central banker reiterated their hawkish bias. Chicago Fed President Charles Evans said that (they) need to make sure inflation pressures don't broaden further, which in turn suggests more rate hikes despite the recession woes.

It should be noted that the Fed’s Beige Book added to the market’s fears by showing increased pessimism among the respondents. Also important to note is the latest print of the CME’s FedWatch Tool marking 95% chance of the Fed’s 75 bps rate hike in November.

Amid these plays, US 10-year Treasury yields refresh a 14-year high above 4.0%, around 4.14% by the press time while its two-year counterpart stays strong near the highest level since 2007, up 0.30% intraday near 4.57% at the latest. It should be noted that the S&P 500 Futures drop 0.60% intraday as bears attacked 3,685 level after reversing from a fortnight top the previous day.

Looking forward, EUR/USD traders may pay attention to the second-tier employment and housing numbers from the US, as well as Eurozone Producer Price Index (PPI) for intermediate directions. However, major attention will be given to the risk catalysts and yields for a clear view amid downside bias.

Technical analysis

A clear downside break of the weekly support line, now resistance around 0.9830, directs EUR/USD bears towards an upward-sloping trend line support from September 28, close to 0.9675 at the latest.