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  • EUR/USD struggles to overcome two-month low, seesaws near intraday high.
  • US Treasury yields, DXY consolidate recent gains as markets recheck Fed-led blow.
  • Sino-American tussles, US infrastructure spending headlines entertain traders of late.
  • Second estimate of Eurozone CPI, ECB’s Lane and US data can be eyed for fresh impulse.

EUR/USD fades bounce off two-month low as bulls and bears jostle around 1.2000 heading into Thursday’s European session. The currency major pair earlier dropped to the lowest since mid-April as Asian traders responded to the US Federal Reserve’s (Fed) bullish performance. However, a lack of major force to back the USD rally afterward seems to portray the quote’s recent sluggish moves.

The Fed left its benchmark interest rate and bond purchase intact, as expected, during Wednesday’s much-awaited monetary policy meeting. However, the US central bank’s upward revision to economics and rate forecast triggered the market’s rush to the US bonds and greenback the previous day. That said, the US Federal Reserve (Fed) now expects US GDP to grow 7.0% in 2021 versus 6.5% previous whereas the PCE figure, the Fed’s preferred inflation gauge, is seen at 3.4% for 2021 and 2.1% for the next year.

As per the latest rate-hike expectations of the Fed policymakers, mostly known as dot-plot, seven officials expect lift-off in 2022 and 13 in 2023. Additionally, Fed Chairman Jerome Powell accepted that the inflation run-up could be more consistent than earlier expected and weighed on the market sentiment, indirectly favoring the US Treasury yields and US dollar index (DXY).

It should, however, be noted that Bloomberg’s piece suggesting the recent increase in the odds favoring the US infrastructure spending, coupled with the profit-booking moves, could be traced for the latest pause in the market’s rush to risk-safety. Even so, the US-China tussles and dears of Delta variant of the covid tame the bulls.

Amid these plays, US 10-year Treasury yields trim the heaviest jump since March, marked the previous day, while taking rounds to 1.57%, whereas the US dollar index (DXY) eases from two-month, not to forget mentioning after the biggest rally in over a year, to 91.37 by the press time.

Given the lack of major data/events and a lapse of the key Fed meeting, EUR/USD traders may lick their wounds and check second-tier catalysts for fresh directions. In doing so, the second reading of the Eurozone Consumer Price Index (CPI) for May, expected to ease from 0.6% to 0.3%, will be the adjacent catalyst to watch. Following that, US Weekly Jobless Claims, Philadelphia Fed Manufacturing Index and comments from ECB Policymaker Philip Richard Lane may also offer extra clues to forecast near-term pair moves. It should, however, be noted that the bearish impulse has set in due to the Fed and may last a bit longer unless any surprise erupts.

Technical analysis

EUR/USD wavers around 200-day SMA level of 1.2000 with oversold RSI and failure to stay below the psychological magnet suggesting a corrective pullback. However, 100-day SMA near 1.2040 guards the quote’s recovery moves.