EUR/USD consolidates weekly losses above 1.1800 ahead of ECB
- EUR/USD snaps three-day downtrend, picks up bids to intraday top.
- Market sentiment dwindles as virus-led economic fears battle monetary policy hawks, US stimulus hopes.
- Decade high inflation contrasts covid woes to challenges ECB optimists, economic forecasts, PEPP decision will be in focus.
- US Weekly Jobless Claims, President Joe Biden’s Six-Pronged strategy will be important too.
EUR/USD rebounds from a one-week low, mildly bid on intraday around 1.1825 heading into the key European Central Bank (ECB) monetary policy decision on Thursday. In doing so, the quote snaps a three-day downtrend as the pair traders repeat the pre-ECB lull, also favoring the regional currency (EUR) bulls.
The recently cautious optimism among the Euro buyers could be linked to the latest comments from multiple ECB policymakers. Earlier in the week, Bundesbank President Jens Weidmann eased the push for trimming the Pandemic Emergency Purchase Program (PEPP). However, ECB’s Robert Holzmann backed quicker tapering but Bostjan Vasle teased a “highly accommodative” monetary policy on Wednesday. With the bloc’s inflation is near the decade high, ECB hawks are up for action but are challenged by the coronavirus fears.
“Tapering needs to occur for purchases to remain inside the ECB PEPP’s EUR1.85trn envelope, and German Bund yields have been rising in anticipation,” said Australia and New Zealand Banking Group (ANZ).
On the other hand, Fedspeak has been clearer due to the latest jump in the JOLTS Job Openings and favors tapering of the asset purchases. Recently, St. Louis Fed Bank President James Bullard and New York Fed Bank President John Williams backed tapering in 2021 whereas Dallas Federal Reserve Bank President Robert Kaplan makes the case for an October taper despite cutting on Q3 GDP due to covid.
Talking about the virus, Australia reports the second day of increase in covid cases whereas China marked an uptick in the COVID-19 numbers. On Wednesday, the US, Germany and the UK also marked an increase in daily covid cases. Furthermore, New Zealand and Britain are hopeful over the booster shots of the vaccines. Additionally, Japan is ready to extend the covid-led state of emergency after the activity restrictions end of September 12.
Other than the mixed chatters from the ECB and the Fed, not to forget the virus updates, doubts over US President Joe Biden’s six-pronged strategy, up for publishing on Thursday, joins optimism over US stimulus to confuse the traders.
Looking forward, EUR/USD traders need to pay close attention to not only the PEPP verdict and ECB statement but also President Christine Lagarde’s press conference. Should the hawks occupy the table and refrain from conveying economic fears, which is less likely, the pair will have a reason to again challenge the 1.1910 hurdle.
In addition to the ECB, weekly jobless figures from the US and President Joe Biden’s widely chattered plan to battle the pandemic will also be important to watch for near-term direction.
Technical analysis
Although a horizontal area from July, surrounding 1.1910, offers a tough nut to crack for the EUR/USD bulls, a convergence of 100 and 200-EMAs on the four-hour chart near 1.1810 puts a floor under the prices.