- EUR/USD consolidates recent gains around two-week top, sidelined of late.
- USD tracks firmer yields as Powell pushes for faster tapering, Omicron anxiety looms.
- Eurozone inflation refreshes record top, ECB policymakers cite growth concerns to defend easy money policies.
- US ADP Employment Change, ISM PMI and Powell testimony 2.0 will be important, German Retail Sales may gain attention too.
EUR/USD defends 1.1300, taking rounds to 1.1325-30 amid sluggish markets ahead of Wednesday’s European session.
The major currency pair seeks clear direction as Fed Chair Powell recalled bond bears but the looming concerns over South African covid variant and vaccine news test declines ahead of the key US data/events.
In his testimony before the Senate Banking Committee, Fed’s Powell said, “It is time to retire the term ‘transitory’ for inflation." The Fed boss also suggested the risk of more persistent inflation and signaled favor for discussing faster taper in the December meeting. His comments triggered the US Treasury yields’ bounce off two-month low, currently up by four basis points (bps) around 1.48%.
It should, however, be noted that the mixed concerns over the Omicron vaccines’ capacity to tame the expectedly lethal virus variant, raised by representatives of drug giants like Moderna, Pfizer and Oxford, test the risk-off mood. On the same line was the news suggesting the US Food and Drug Administration’s (FDA) emergency use authorization of an antiviral pill from Merck and Ridgeback Biotherapeutics.
Additionally, cautious optimism in China and Australia add to the market’s warmer welcome of December, which in turn challenges the US Dollar Index (DXY) bulls and restricts EUR/USD declines.
Elsewhere, the European Central Bank (ECB) officials did cite the challenges the coronavirus resurgence offer to the bloc’s economy, which in turn requires extended easy money policies even if supply constraints may favor reflation woes for a while. That being said, Eurozone Consumer Price Index (CPI) tracked its German counterpart to refresh all-time high with a 4.6% figure.
Amid indecisive markets, EUR/USD traders may follow German Retail Sales for October, expected -2.0% versus -0.9% prior, for fresh impulse. However, major attention will be given to the second round of Fed Chair Powell’s testimony, US ISM Manufacturing PMI and ADP Employment Change. Above all, developments surrounding Omicron are the key of late.
Technical analysis
Failures to cross 20-DMA, around 1.1375, join the pair’s sustained trading below monthly resistance line, near 1.1430, to keep EUR/USD sellers hopeful of refreshing yearly low beneath 1.1200
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