- EUR/USD refreshes intraday low, consolidates biggest daily gains in three months around weekly top.
- Market sentiment sours as virus woes challenge economic recovery, Fed’s Kashkari fails to placate fears.
- Increasing odds of ECB’s QE taper jostles Fed’s rate hike concerns amid a light calendar.
- US dollar shrugs off downbeat Treasury yields, seeks more clues for further recovery.
EUR/USD eases from a weekly high to 1.1790, following the longest leap on Friday in 12 weeks, heading into Monday’s European session. While fears of the US economic recovery triggered the pair’s jump the previous day, the risk-off mood underpins the US dollar during a sluggish start to the week.
The escalating fears of the Delta covid variants could be linked to the market’s latest risk aversion, as well as the USD’s corrective pullback.
Recently, the National Institutes of Health’s (NIH) Director Dr. Francis Collins appeared on Fox News and cited fears of witnessing 200,000 cases per day readings of the US infections. Additionally, CNN, mentioned, “The country last averaged over 200,000 cases per day in January, before the Covid-19 vaccines were widely available. The rate of new hospitalizations among people in their 30s increased by nearly 300% over the past month, according to an analysis of data from the US Centers for Disease Control and Prevention (CDC).”
It’s worth noting that daily covid cases from Australia jumped to the fresh one-year whereas China and the UK, as well as Eurozone, reports a bit easy virus figures of late. However, the latest disappointment from China’s Retail Sales and Industrial Production, preceded by Friday’s US Michigan Consumer Sentiment Index for August that dropped to a 10-year low, keeps the sentiment heavy.
Additionally, chatters surrounding the monetary policy adjustments by the European Central Bank (ECB) and the US Federal Reserve (Fed) confuse the EUR/USD traders. As per the latest poll from Reuters, the ECB is up for tapering during the Q4 whereas Minneapolis Fed President Neel Kashkari said, per Reuters, “He wants to see a ‘few more’ strong labor market reports before tapering bond purchases.”
On a different page, the Taliban’s takeover of Afghanistan and the global ire over the same, recently by New Zealand President Jacinda Ardern, joins the US-China tussles to weigh on the risk appetite.
Amid these plays, the US Dollar Index (DXY) adds 0.05% around 92.55 after declining the most on Friday. Further, the US 10-year Treasury yields drop 3.4 basis points (bps) to 1.263% after declining the most since July 06 the previous day.
Looking forward, fears of the virus woes weighing on the economic recovery could keep weighing on the EUR/USD prices amid a light calendar. Though, any major negatives for the US may push the greenback gauge to follow US Treasury yields and reverse the Asian session pullback.
Technical analysis
The 21-DMA restricts the immediate upside of the EUR/USD prices around 1.1800 whereas a downward sloping trend line from early June, surrounding 1.1830, adds to the upside filters. However, the major currency pair crossed a horizontal area comprising levels marked since July 21 near 1.1750 the previous day, backed by an upbeat RSI and Momentum line, which in turn keeps the buyers hopeful. Hence, EUR/USD is indecisive between 1.1830 and 1.1750.
