- EUR/USD struggles to extend Monday’s gains, seesaws around one-week top.
- Comments from US Treasury Secretary Yellen, inflation expectations probe the pair buyers.
- ECB hawks battle with the bears amid risk-on mood but recession woes keep buyers away.
- October’s ZEW Sentiment figures for EU/Germany will offer immediate directions, risk catalysts are more important.
EUR/USD treads water at the eight-day high, recently retreating to 0.9840, as buyers seek more clues to extend the previous day’s run-up during Tuesday’s Asian session. As a result, today’s European and German ZEW data for October will be important for fresh impulse amid a light calendar elsewhere.
The major currency pair’s latest inaction could be linked to a mixed play between the risk-on mood and the hawkish Fed speak. Also challenging the EUR/USD traders is a light calendar in the US.
On the positive side, Germany’s rejection of recession fears and hawkish comments from the European Central Bank (ECB) policymakers favor the pair buyers. Additionally, the broad US dollar weakness due to the receding fears of the UK’s market collapse also fuels the EUR/USD prices. Furthermore, downbeat US data adds strength to the upside momentum. That said, NY Empire State Manufacturing Index for October dropped -9.5 versus -4.0 expected and -1.5 prior.
Alternatively, hawkish Fed bets and fears of market intervention in Japan and China seem to challenge the EUR/USD buyers. That said, CME’s FedWatch Tool prints a nearly 95% chance of a 75 bps Fed rate hike in November. In doing so, the tool might have taken clues from upbeat comments from US Treasury Secretary Janet Yellen, suggesting a strong US jobs market, as well as upbeat US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data.
It should be noted that China’s zero-covid policy, delaying of the key data/events and determination to defend the might of taking control in Hong Kong and Taiwan also challenge the pair’s upside momentum.
Amid these plays, S&P 500 Futures track Wall Street’s gains but the US 10-year Treasury yields retreat to 3.99%, which in turn probes the US Dollar Index (DXY) bears of late.
Looking forward, downbeat expectations from Germany’s ZEW figures for October contrast with the likely improvement in the Eurozone sentiment index, which in turn may trouble the EUR/USD traders and can allow the intraday sellers to sneak in. However, major attention will be given to the risk catalysts for clear directions.
A daily closing beyond the 21-DMA, around 0.9780 by the press time, directs buyers towards a five-week-old resistance line, close to 0.9880 at the latest.
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