EUR/USD remains on the front foot near nine-month high. Hawkish comments from European Central Bank officials contrast with dovish bias surrounding the Federal Reserve to favor Euro buyers. Upbeat Eurozone Consumer Confidence adds strength to the EUR/USD bulish bias.
Preliminary readings of German, Eurozone and the US PMIs for January, speech from ECB’s Lagarde will be important for intraday.
EUR/USD grinds near intraday high surrounding 1.0880 as the pair buyers stay in the driver’s seat for the fourth consecutive day heading into Tuesday’s European session.
In doing so, the Euro pair cheers hawkish comments from the European Central Bank (ECB) officials, as well as bearish bias surrounding the Federal Reserve (Fed) ahead of the next week’s Federal Open Market Committee (FOMC) meeting. It should be noted, however, that the technical details join cautious mood ahead of the key data/events, as well as news challenging the sentiment and probing the US Dollar bears, to probe the pair buyers of late.
European Central Bank hawks propel EUR/USD
On Monday, European Central Bank (ECB) President Christine Lagarde reiterated his support for the higher rate and Governing Council member Ignazio Visco backed the same. However, major attention was given to ECB Governing Council Member Peter Kazimir who said, “I am convinced that we need to deliver two more hikes by 50 basis points (bps)." The idea of a 50 bps rate hike was something that many policymakers have refrained from in recent days and has bolstered the EUR/USD strength.
On the other hand, chatters surrounding the Federal Reserve’s (Fed) 25 bps rate lift in February and policy pivot seemed to have weighed on the US Dollar amid the pre-FOMC blackout period, which in turn favor the EUR/USD buyers.
Contrasting data from Eurozone, United States underpin Euro upside
Not only the hawkish ECB talks versus the easing bias surrounding the Fed but upbeat prints of Eurozone Consumer Confidence for January, -20.5 versus -22.5 expected and -22.2 prior, also contrasts with the downbeat United States data to fuel the EUR/USD pairs’ upside. That said, US Conference Board’s Leading Index for December, to -1.0% versus -0.7% expected and -1.1% prior, added weakness into the US Dollar.
US Inflation expectations, Sino-American chatters probe EUR/USD bulls
While aforementioned catalysts are active in pleasing the EUR/USD pair buyers, an increase in the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data, join the US-China tussles to challenge the upside. That said, the inflation precursors for the 10-year and 5-year tenures rise for the third consecutive day to 2.28% each and justify the pre-blackout hawkish Fed comments.
PMIs, ECB’s Lagarde in focus
Looking forward, the preliminary prints of the monthly activity data from the S&P Global surveys for Germany, Eurozone and the US will be crucial for the EUR/USD pair traders to watch for immediate directions. However, major attention will be given to the ECB President Christine Lagarde’s speech amid hawkish bias for the regional central bank. Considering the upbeat forecasts for the data from Germany and Eurozone versus the consensus favoring softer US data, as well as hopes of ECB’s aggression on rate hikes, the EUR/USD buyers are likely to keep the reins.
EUR/USD technical analysis
Despite failing to cross the six-week-old resistance line the previous day, EUR/USD resumes run-up to challenge the stated key hurdle surrounding 1.0920 as bulls keep the reins above the 10-DMA, close to 1.0825 at the latest. Also keeping the EUR/USD buyers hopeful are the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator. However, the nearly overbought Relative Strength Index (RSI) line, placed at 14, probe the upside bias.
In addition to the 1.0920 hurdle, the EUR/USD bulls will also need validation from the recent multi-day top of near 1.0930, as well as April 2022 high near 1.0936, to keep the reins.
Alternatively, a downside break of the 10-DMA support of 1.0825 could drag the Euro bears towards the resistance-turned-support line from the mid-December, near 1.0650. That said, the previous weekly low and the December 2022 peak, respectively near 1.0765 and 1.0735, could also as the downside filters for the EUR/USD pair. Overall, EUR/USD is likely to remain on the bull’s radar even if the upside room appears limited.
