EUR/USD pares weekly gains near 1.1300 as ECB hawks flex muscles
- EUR/USD retreats from eight-day top, snaps four-day uptrend.
- Record top inflation, all-time low unemployment rate favor ECB hawks to back rate hikes in 2022.
- The bloc’s central bank isn’t expected to alter monetary policy measures, nor release the revised economic projections.
- US ISM Services PMI, Factory Orders and second-tier jobs data may also entertain traders.
EUR/USD bulls take a pause around 1.1300, after a four-day uptrend to refresh weekly top, amid the pre-ECB mood.
The major currency pair cheered US dollar weakness of late, in addition to the upbeat economics at home. However, cautious sentiment ahead of the key weekly data/events seems to probe the EUR/USD buyers during Thursday’s Asian session.
Inflation fears, recently highlighted by US President Biden’s all three Nominees for the Fed Board, challenge the risk appetite and drag the EUR/USD prices even as the upbeat Eurozone HICP figures propelled the quote to refresh weekly top the previous day. Also on the positive side was the negative surprise from the US ADP Employment Change for January, -301K versus +207K expected. Additionally, US Treasury Secretary Janet Yellen’s latest communication suggesting that describing inflation as transitory was a mistake also renewed reflation fears and weighed on the quote.
Amid these plays, the US 10-year Treasury yields consolidate weekly losses around 1.77% whereas the stock futures in the US and Europe print losses. The sour sentiment adds strength to the US Dollar Index (DXY) and allows the greenback gauge to stabilize around 96.00 despite posting the first weekly loss in three.
That said, a record top print of Eurozone inflation, as per the headline HICP YoY outcome, follows the previously released all-time low Unemployment Rate of the bloc to enable the European Central Bank (ECB) policymakers to convey the bullish bias. However, a difference of fundamentals between the US and the Eurozone, as well as diverse figures of various nations in the region, may allow ECB President Christine Lagarde to reiterate cautious optimism and extend the latest pullback of the EUR/USD prices.
Other than the ECB moves, US Q4 Nonfarm Productivity and Unit Labor Costs will join the January ISM Services PMI and Factory Orders for December to offer a busy day for the EUR/USD traders.
Read: ECB February Preview: Euro bulls hope for a hawkish ECB on hot EU inflation
Technical analysis
Sustained trading beyond the previous resistance line from January 14 and 10-DMA, respectively around 1.1180 and 1.1260, keeps the EUR/USD buyers hopeful as they brace for the key monetary policy meeting by the European Central Bank (ECB). Also adding strength to the bullish bias is the steady RSI line and the MACD conditions that tease bulls.
Alternatively, a clear upside break of the 50-DMA level of 1.1310 will enable the EUR/USD bulls to aim for the 100-DMA surrounding 1.1435.