- EUR/USD struggles for clear direction during the first negative week in three.
- Yields ease from nine-month high as Fed hawks turn cautious ahead of jobs report.
- Downbeat inflation expectations and softer data test the pair sellers.
- Eurozone CPI, US NFP eyed for fresh impulse.
EUR/USD pares intraday gains around 1.1290, stays indecisive after Thursday’s losses, during Friday’s Asian session.
The major currency pair followed firmer Treasury yields to print daily losses the previous day. However, cautious sentiment ahead of the preliminary inflation data for the bloc and the US jobs report for December challenges the pair traders of late.
In addition to the pre-NFP trading lull, a two-week low of the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, also underpin the latest pullback in the US bond yields.
That said, hawkish Fedspeak and FOMC Minutes have earlier portrayed increasing odds of the Fed’s faster rate hike and balance sheet alteration, which in turn propelled the yields. That said, St. Louis Fed President James Bullard pushed for a March rate hike whereas Federal Reserve Bank of San Francisco President and an FOMC member Mary C. Daly marked the need to raise interest rates to keep the economy in balance.
At home, easing German inflation data tested the Bund yields even as the ECB policymakers recently sounded hawkish. On the other hand, Fed policymakers paid a little heed to the softer prints of the latest Factory Orders, Weekly Jobless Claims, ISM Services PMI and Good Trade Balance.
Against this backdrop, the US 10-year Treasury yields refreshed a nine-month high to poke 1.75% before ending Thursday’s North American session with 2.5 basis points (bps) of a daily gain near 1.728%, easing to 1.725% at the latest. The same weighed on the Wall Street benchmarks even as downbeat data pushed bears to satisfy with smaller losses. That said, S&P 500 Futures print mild gains and so do Japan’s Nikkei 225.
Looking forward, the first estimation of the Eurozone Consumer Price Index (CPI) for December will offer immediate direction to the pair ahead of the US employment data. As per the market consensus, the headline Nonfarm Payroll (NFP) rise from 210K to 400K while the Unemployment Rate may have eased to 4.1% from 4.2% prior. The underemployment rate, however, is likely rising from 7.8% to 8%.
Read: Nonfarm Payrolls Preview: A strengthening labor market backs a tighter monetary policy
Technical analysis
EUR/USD seesaws between the weekly resistance line and an ascending support line from November 24, respectively around 1.1320 and 1.1260, with sustained trading below the key SMAs and bearish MACD signals keeping sellers hopeful.
