EUR/USD: Wednesday’s Doji, ECB Economic Bulletin teases buyers below 1.0200

EUR/USD turns interesting as it picks up bids to 1.0165, justifying Wednesday’s bullish Doji, during Thursday’s mid-Asian session. That said, the pair buyers seek validation from recently softer yields and hopes of optimistic statements from the monthly ECB Economic Bulletin.

That said, the major currency pair refreshed it's weekly low the previous day before bouncing off 1.0122 to match the day’s opening levels and print a bullish Doji candlestick. In doing so, the quote tracked the US dollar moves and mixed concerns surrounding the gas crisis in the bloc, not to forget unimpressive data, ahead of Friday’s all-important US Nonfarm Payrolls (NFP).

The US Dollar Index (DXY) remains indecisive around 106.35 after refreshing the weekly top with 106.82 earlier on Wednesday.

The greenback’s gauge initially cheered the US-China tension over Taiwan, as well as downbeat Eurozone Retail Sales and firmer US PMIs. However, firmer equities and upbeat China PMI seemed to have joined the pre-NFP anxiety to probe the DXY bulls. Also keeping the EUR/USD buyers hopeful is the news shared by Bloomberg. 

In a pre-release of its economic bulletin published on Tuesday, shared by Bloomberg, the European Central Bank (ECB) revealed that the fiscal support provided to the euro area economies amidst the Russia-Ukraine war is boosting the bloc’s GDP while temporarily lowering inflation.

Eurozone’s Retail Sales fell by 1.2% MoM in June versus 0.0% expected and 0.4% last while the US ISM Services PMI for July rose to 56.7 from 55.3 prior and the market expectation of 53.5. Furthermore, the final reading of the US S&P Global Services PMI for July dropped to 47.3, marking the first contraction in two years, from 52.7 in June and the flash estimate of 47. Elsewhere, China’s Caixin Services PMI for July also surprised markets with upbeat data.

It’s worth observing that the Fed policymakers have been mostly hawkish of late and challenge the EUR/USD bulls. St. Louis Federal Reserve Bank President James Bullard said, “(There is) still some ways to go to get to a restrictive monetary policy." The policymaker adds that he still wants to get to 3.75 to 4% this year while showing a preference for the type of frontloading. Other than Fed’s Bullard, Fed Minneapolis President Neel Kashkari and Richmond Fed President Thomas Barkin also joined the league of the Fed hawks to exert downside pressure. However, San Francisco Fed President Mary Daly appeared to have flashed mixed signals and tamed the DXY bulls afterward. The policymaker said, "Markets are ahead of themselves in expecting rate cuts next year."

Amid these plays, the Wall Street benchmarks closed with notable gains but the S&P 500 Futures print mild losses at the latest. Further, the US 10-year Treasury yields remain pressured at around 2.71%, down three basis points (bps) by the press time.

Moving on, Germany’s Factory Orders for June will precede the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, as well as the weekly Initial Jobless Claims, expected 259K versus 256K prior, to decorate the calendar. However, major attention will be given to the comments from the ECB and the Fed policymakers, as well as the Sino-American tension over Taiwan for clear directions ahead of Friday’s US NFP.

Technical analysis

A convergence of the previous support line from mid-July and the 10-DMA, around 1.0195, precedes the 1.0200 threshold to restrict short-term EUR/USD recovery. Meanwhile, the 21-DMA and Doji’s low, respectively around 1.0155 and 1.0120, could challenge the intraday sellers.