EUR/USD stays defensive around 1.0900 despite hawkish ECB, US inflation, Fed Minutes eyed

• EUR/USD remains sidelined after three-week uptrend, bulls run out of steam of late.
• US employment data renew hawkish Fed bets but mixed details check Euro bulls.
• ECB remains hawkish despite cautious mood ahead of the key US data/events.
• US-China tension, US inflation and FOMC minutes will be crucial for clear directions, Easter Monday holiday to limit intraday moves.

EUR/USD seesaws around 1.0900 during a sluggish start to the key week amid Easter Holiday. Apart from the holidays, recently mixed concerns about the Federal Reserve’s (Fed) next move, as well as the European Central Bank’s (ECB) rate hike concerns also weigh on the Euro pair.

Hawkish bets on the Fed’s 0.25% rate hike increased after upbeat US employment data for March. However, the market participants also expect a rate cut in late 2023 and hence pour cold water on the face of the Fed hawks, which in turn please the EUR/USD bulls.

That said, the US Bureau of Labor Statistics (BLS) revealed that Nonfarm Payrolls (NFP) rose by 236K in March, the lowest since January 2021 (considering the revisions), versus 240K expected and 326K prior. Further, the Unemployment Rate eased to 3.5% versus 3.6% prior while the Labor Force Participation Rate improved to 62.6% from 62.5%. Finally, annual wage inflation, per the Average Hourly Earnings, dropped to 4.2% from 4.6%, versus market forecasts of 4.3%. Previously, US JOLTS Job Openings dropped to the 19-month low in February while the ADP Employment Change for March also disappointed markets with 145K figures. Further, the US ISM Services PMI for March also amplified pessimism as it dropped to 51.2 versus 54.5 expected and 55.1 prior.

The downbeat US data also propels fears of a recession in the world’s largest economy and weigh on the US Dollar, as well as fuels the EUR/USD price. As per the latest research, the Federal Reserve’s (Fed) preferred gauge of economic health backed the recession woes, via bond market clues. Reuters said, “Research from the Fed has argued that the ‘near-term forward spread’ comparing the forward rate on Treasury bills 18 months from now with the current yield on a three-month Treasury bill was the most reliable bond market signal of an imminent economic contraction.”

At home, upbeat German inflation clues and PMI data, as well as mostly firmer statistics from the Eurozone, allowed the ECB hawks to keep the reins and suggest further rate increases from the region’s central bank, which in turn propel the EUR/USD prices. That said, ECB policymaker Klaas Knot said on Friday that it is unclear whether a rate hike of 25 or 50 basis points is required.

On a different page, China’s military drills near Taiwan Strait escalates US-China tension and allow the US Dollar sellers to take a breather after the US Dollar Index (DXY) posted a three-week downtrend.

While the fresh hawkish bets on the Fed and upbeat US data, as well as geopolitical woes, can pause the US Dollar weakness, the EUR/USD bears are far from the table and needs more clues to extend the upward trajectory amid the Easter Monday holidays.

Technical analysis

A 12-day-old rising wedge bearish chart formation, currently around 1.0860 and 1.1000, keeps EUR/USD bears hopeful.