EUR/USD struggles below 1.2200 as taper tantrum seeks acceptance

EUR/USD looks for fresh clues while portraying a dormant day around 1.2180, heading into Monday’s European session. The currency major pair dropped the previous day as the market’s reflation fears put a bid under the US dollar. However, the lack of major directives afterward keeps traders troubling amid a quiet Asian session.

The fears of heating price levels could gain clues from the upbeat PMI figures, published last Friday. The same pushed some more Fed policymakers, namely Atlanta Federal Reserve President Raphael Bostic and Philadelphia Fed President Patrick Harker, to join the line of Dallas Federal Reserve Bank President Robert Kaplan and back the need of tapering talks.

Also weighing on the quote could be fears of the coronavirus (COVID-19) Indian strain as well as chatters surrounding the covid outbreak from Wuhan laboratory, not to forget Belarus plane hijack.

Alternatively, comparatively lesser prices pressure on the European side and recent welcome economics join faster vaccinations to tame the EUR/USD bears of late.

Amid these plays, market sentiment dwindles as the US 10-year Treasury yields seesaw around 1.62% whereas S&P 500 Futures rise 0.30% intraday by the press time. Also printing the pair traders’ indecision is the US dollar index (DXY) that struggles to keep Friday’s bounce off early January lows around the 90.00 threshold.

Given the uncertainty over the US Federal Reserve’s (Fed) next moves, each incoming data will be the key for the EUR/USD traders, not to forget comments from the Fed policymakers. Hence, today’s speech of Fed Governor Lael Brainard and the Chicago Fed National Activity Index for April, prior +1.7, will be important to determine the pair’s near-term moves.

Should more of the Fed policymakers push for tapering talks, the rush to risk-safety can provide the much-needed pullback to the EUR/USD prices.

Technical analysis

The 1.2120-15 area, comprising 100-SMA and support line of the monthly rising wedge bearish formation, becomes the crucial level to watch. Meanwhile, corrective pullback needs to cross the previous support line from May 13, around 1.2215, before challenging the stated wedge’s upper boundary close to 1.2265.