- EUR/USD edges higher, consolidates the previous day’s losses.
- US Treasury yields turn south, US dollar fades corrective pullback.
- Markets search for clear direction after FOMC minutes renewed tapering concerns.
- ECB’s Lagarde, second-tier EU, US data eyed for fresh impulse.
EUR/USD flirts with an intraday high of 1.2185, up 0.07% on a day, heading into Thursday’s European session. In doing so, the currency major pair licks FOMC Minutes-led wounds as US Treasury yields trim the previous day’s gains, the highest in a week.
With the US FOMC Minutes confirming that some policymakers are willing to discuss tapering in the next few meetings, reflation risks returned to the table and put a safe-haven bid under the US dollar. The risk-off mood also took clues from St. Louis Fed President James Bullard’s comments who cited the need to talk over the Fed’s next move.
It should, however, be noted that a lack of major catalysts during Asia offered opportunities to the US Treasury yields to shed two basis points (bps) from its previous run-up to re-test the 1.66% level by the press time. However, the S&P 500 Futures struggle to find traction and seesaws between mild gains and losses of late. Some sentiment-related headlines that couldn’t direct markets include the European Union’s (EU) new VAT rules for, Aussie-China tussles and increasing odds of a ceasefire in Gaza.
Amid these plays, the US dollar index (DXY) drops 0.06% intraday as sellers attack 90.00 by the press time.
Looking forward, Germany’s Producer Price Index (PPI) for April and comments from the ECB President Christine Lagarde will be followed for fresh impulse before the US Jobless Claims and Philadelphia Fed Manufacturing Survey data.
Above all, EUR/USD traders will be more interested in hearing more about tapering and coronavirus (COVID-19) vaccine from the US and EU respectively. Given the recently hawkish FOMC minutes, Fedspeak will be closely observed before targeting any further USD strength. Though, the US Treasury yields may help the pair to test the immediate hurdle.
Technical analysis
Failures to cross February high and sluggish MACD could extend EUR/USD pullback towards April’s top surrounding 1.2150. However, a convergence of 21-day SMA and a seven-week-old support line near 1.2100 becomes the key support to break for EUR/USD sellers.
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