- EUR/USD pauses two-day downtrend, remains sidelined on the key day.
- US Treasury yields remain pressured as markets brace for faster Fed tapering, extended PEPP at ECB.
- Virus woes escalate but with hopes of a cure, China, Russia portray geopolitical fears.
- ECB’s Lagarde, Eurozone Retail Sales and US ISM Services PMI are important too.
EUR/USD grinds lower around 1.1300, indecisive ahead of Friday’s European session. The major currency pair struggles for clear direction after two consecutive days of a downside as traders await important catalysts scheduled for the day amid mixed macros and indecision over the major central bank’s next moves.
Among the positives are hopes that the coronavirus variant from South Africa, dubbed as Omicron, will soon have its cure from the UK. On the same line were talks of the covid strain’s less lethal symptoms than initially feared. Furthermore, the US policymakers finally avoided the government shutdown, at least till February, while adding bars for the market’s preference for the US dollar.
Alternatively, hawkish Fedspeak, led by including Federal Reserve (Fed) Bank of San Francisco President Mary Daly and Richmond President Thomas Barkin, fuelled US Treasury yields the previous day. Also helping the bond sellers were softer-than-expected prints of the US Initial and Continuing Jobless Claims for the week, as well as downbeat Challenger Job Cuts for November.
It’s worth noting that the Eurozone Unemployment Rate eased in November and favored the European Central Bank (ECB) hawks. However, the regional central bank signaled less hawkish performance during December’s meeting, per the latest updates from Reuters.
Additionally, the European Union (EU) and the US criticism of China’s moves in the South China Strait and Taiwanafter Thursday’s talks in Washington join Beijing’s calls for the US to cut the tariffs on their goods to weigh on the market sentiment.
Amid these plays, the US 10-year Treasury yields fade bounce off 10-week low, marked the previous day, but the S&P 500 Futures also print 0.12% intraday downside by the press time. Furthermore, the US Dollar Index (DXY) rises 0.05%, up for the third consecutive day around 96.17 at the latest.
Moving on, ECB’s President Christine Lagarde and Eurozone Retail Sales for November may entertain EUR/USD traders but major attention will be given to the US jobs report and ISM Services PMI for the last month.
EUR/USD dropped for the last two days following its failures to cross the 100-SMA, around 1.1320 at the latest. Also favoring the sellers is the MACD line that flashed bear cross.
However, a clear downside break of the one-week-long ascending support line, around 1.1255 at the latest, becomes necessary for the pair sellers to aim for the yearly low of 1.1186. Following that, 61.8% Fibonacci Expansion (FE) of November 09-30 moves, near 1.1120, will gain the market’s attention.