- EUR/USD takes offers to refresh intraday low, reverses Wednesday’s rebound.
- Sour sentiment backs USD rebound despite pre-Fed dilemma, mixed comments from ECB policymakers.
- Stock futures, Treasury yields remain sluggish, DXY pares weekly loss.
- Bulls need Lagarde to join ECB hawks, softer US Retail Sales for August.
EUR/USD reverses recent gains, offered around intraday low near 1.1810 ahead of Thursday’s European session. The major currency pair benefited from the cautious optimism concerning the Fed’s tapering and ECB moves the previous day before the risk-off catalysts and the pre-US Retail Sales caution weighed on the quote.
Australia’s trilateral security pact with the UK and the US, availing nuclear-powered submarines, signals a further worsening of relations with China and weighed on market sentiment earlier in the day. Further, higher virus infections in Australia, China and New Zealand also challenge the risk appetite, as well as on the EUR/USD prices.
The US adds the UK to its welcome list for the next week’s diplomatic talks in the White House and amplifies market fears that the Western friends are again gearing up for a battle with China, which in turn heavy the sentiment.
On Wednesday, the previously increasing odds of no tapering from the Fed, backed by softer US Consumer Price Index (CPI), joined comments from the ECB policymakers to underpin EUR/USD rebound. Among the ECB policymakers, Executive Board Member Isabel Schnabel was more hawkish while saying, “Market may be overestimating risks to the global growth outlook.” On the same line was ECB Chief Economist Philip Lane who said that he is happy that the accommodative monetary policy is helping to build core inflation in the euro area, as reported by Reuters.
While portraying the market mood, stock futures erase early Asian gains while the US 10-year Treasury yields drop one basis point (bp) to retest 1.297% at the latest.
Looking forward, ECB President Christine Lagarde’s speech will be important to confirm the cautious optimism conveyed recently by the other central bank policymakers of the bloc. However, more important will be weekly employment data from the US and Retail sales for August as market optimism fades and could weigh on risk if the scheduled data hints at further tapering, by way of positive surprise.
Read: US August Retail Sales Preview: Can gold turn bullish on a weak print?
Technical analysis
EUR/USD portrays a bullish flag on the four-hour chart, keeping the pair buyers hopeful unless the quote drops below the flag’s support line near 1.1750. On the contrary, an upside break of 1.1830 will confirm the bullish chart pattern and will set the tone for a fresh rally. It’s worth noting that the 50-SMA adds strength to the stated hurdle to the north.
