EUR/USD jumps back beyond 1.1750 with eyes on Fed Chair Powell

  • EUR/USD picks up bids to intraday high to consolidate recent losses.
  • Risk appetite improves amid mixed headlines, DXY tracks softer Treasury yields.
  • Fedspeak renewed fears of Fed tapering but mixed data seem to challenge policy hawks.
  • US Core PCE Inflation may entertain traders before Powell’s showdown at Jackson Hole in focus.

EUR/USD refreshes intraday high to 1.1760, up 0.05% on a day heading into Friday’s European session. The major currency pair snapped a four-day uptrend near the weekly high during the previous day as risk-off underpinned the US dollar. However, mixed headlines from China, New Zealand and doubts over Fed’s tapering seem to favor the recent consolidation in prices.

Be it tailor-made extended lockdown in New Zealand or China Commerce Ministry’s confirmation that the Sino-American relations are soothing, market sentiment cheered both amid a light calendar. Also on the risk-positive side were receding virus infections in Australia and a bit in the West.

Even so, market bulls are probed ahead of Fed Chair Jerome Powell’s key speech at the annual event of the Jackson Hole Symposium. Although Powell is likely to defend the Fed’s easy money policy, the latest Fedspeak has been hawkish and challenge the leader.

Among the Fed hawks was Dallas Fed President Robert Kaplan who said, “Fed’s asset purchases had their purpose and their time but not longer well-suited to the situation.” James Bullard and Ester George were the rest of the non-voting Fed members who followed Kaplan and firmed up concerns over tapering.

Elsewhere, a blast at Kabul airport and reports of two or three US officials being hurt raised worries of the US response to the Taliban. In response to the same, US President Joe Biden held militant group ISIS responsible for the attack and showed readiness to respond, easing pressure off Taliban­–US ties and adding to the risk-on mood.

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On Thursday, the second version of the US Q2 Gross Domestic Product (GDP) got upward revision to 6.6% QoQ versus 6.5% prior, missing the expected 6.7% whereas Core PCE figures in the same quarter were confirmed the prior market consensus of 6.1%. Further, weekly jobless claims from the US also inched up but held lower ground. On the other hand, German GfK Consumer Confidence dropped for September while ECB Meeting Accounts stated the need to revise forward guidance on rates.

Amid these plays, S&P 500 Futures reverse early Asian losses, up 0.15% by the press time, whereas the US 10-year Treasury yields remain pressured around 1.34% at the latest. Furthermore, the US Dollar Index (DXY) also struggles to extend Thursday’s recovery moves, down 0.05% near 93.01.

Looking forward, the US Core PCE Price Index for July will join the risk catalysts to entertain EUR/USD traders but major attention will be on how Powell defends the Fed’s easy money policies.

Read: Fed Chair Powell’s Jackson Hole Speech: Caution will win out

Technical analysis

EUR/USD flirts with 100-SMA and an ascending trend line from the last Friday, near 1.1750-45, as the MACD signal line inches closer to flash a bearish sign, which in turn raises doubts on the latest bounce. The same joins the quote’s inability to cross 200-SMA during the previous uptrend to direct sellers toward the yearly low, marked on August 20, surrounding 1.1665. Meanwhile, an upside clearance of 200-SMA level of 1.1785 needs a clear break above the mid-August peak of 1.1804 to aim for the August 05 peak near 1.1855.

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