- EUR/USD remains on the back foot around two-week low.
- Market sentiment remains sour as Russia-Ukraine worries join pre-Fed anxiety.
- Yields pause four-day downtrend, stock futures remain depressed.
- US CB Consumer Confidence will offer more insight on inflation ahead of FOMC.
EUR/USD fades bounce off two-week low as bears brace for a clear break of 1.1300 during early Tuesday in Europe, mildly offered around 1.1315 by the press time.
The quote dropped to a fortnight low the previous day as the US dollar began the Fed week on a front foot. In addition to the pre-Fed anxiety, geopolitical concerns surrounding Russia and mixed data from Eurozone, as well as from the US, keep EUR/USD traders on the edge ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting.
Although strong German PMIs for January enabled ECB Governing Council member Francois Villeroy de Galhau to reiterate his hawkish bias, mixed Eurozone activity numbers poured cold water on the face of EUR/USD buyers.
On the other hand, US PMIs were sluggish too but US inflation expectations, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, bolster the Fed’s rate hike concerns and weigh on the EUR/USD prices.
Additionally, talks of economic sanctions on Russia, if it invades Ukraine, join China Commerce Ministry’s fears of downbeat 2022 to exert additional downside pressure on the market sentiment.
Amid these plays, the US 10-year Treasury yields pause a four-day downtrend, around 1.78% while the US Dollar Index (DXY) rises for the second consecutive day while poking the six-week-old resistance line.
Looking forward, the economic calendar remains mostly quiet in Europe, with only IFO numbers, but the US CB Consumer Confidence for January, prior 115.8, will offer additional hints of inflation conditions and becomes crucial for EUR/USD traders if citing reflation fears.
Technical analysis
EUR/USD battles the 200-SMA, as well as a descending trend line from January 17, by the press time.
Given the lack of firmer RSI and strong resistances, EUR/USD prices are likely to witness a pullback from the 50% Fibonacci retracement (Fibo.) level of November-January advances, near 1.1335, towards the aforementioned trend line near 1.1300.
On the contrary, the 1.1335 level, comprising 200-SMA holds the key to the pair’s fresh upside towards December 2021 top near 1.1385.
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