- EUR/USD licks the Fed-led wounds, refreshes intraday top.
- Upbeat sentiment weighs on USD as Japan’s off restricts bond moves.
- China, US stimulus and vaccine help consolidate the Fed-led gains.
- Upbeat PMIs need validation from risk catalysts, ECB policymakers to keep buyers hopeful.
EUR/USD takes the bids to renew intraday top above 1.1700, up 0.17% on a day around 1.1708 by the press time of the pre-European session on Thursday.
The major currency pair dropped to the lowest since August 20 the previous day after the US Federal Reserve (Fed) announced hints of the much-awaited bond purchase tapering. However, the risk appetite improved afterward and triggered the US dollar’s pullback, activating the EUR/USD bounces off multi-day low.
Although major global rating agencies convey pessimism over the Evergrande-led burden on China, the real-estate firm remains optimistic over the future while the People’s Bank of China (PBOC) also keeps the Beijing money market immune from any blow. Also, the US policymakers’ progress on the much-awaited stimulus and the US Food and Drug Administration’s (FDA) approval to the Pfizer-BioNTech booster shot of the covid vaccine for the aged above 65 favor the risk-on mood, indirectly weighing on the US dollar.
The US Dollar Index (DXY) drops 0.10% on a day while stepping back from a one-month peak, paring the gains earned due to the Federal Reserve’s (Fed) tapering announcement.
The Fed matched market expectations of keeping the benchmark rate unchanged at 0.25% but the policymakers were divided over the hike, now expecting a lift from either 2022 or 2023 versus the previous support for 2023. It’s worth noting that the US central bank cut the 2021 growth forecast and remained unclear on when the rate will start rising after the tapering concludes.
Further, Chairman Jerome Powell propelled the greenback by not only signaling the positive conditions for the consolidation of the asset purchase but also the start of taper as soon as the next meeting, even if on good employment data not needing too strong figures.
Elsewhere, mixed comments from European Central Bank (ECB) Governing Council member Madis Muller poked the previously hawkish comment flow of ECB policymakers and weighed on the EUR/USD prices.
That said, stock futures remain mildly bid while the US Treasury yields remain inactive after declining over two basis points (bps) to 1.30% the previous day amid an off in Japan.
Having witnessed the Fed showdown, EUR/USD traders will rely on the flash readings of September month activity data from the Markit for the Eurozone and the US for fresh impulse. Given the upbeat expectations from both, support can be taken from German PMIs and the US Weekly Jobless Claims.
Technical analysis
Although oversold RSI triggered the EUR/USD pair’s corrective pullback, recovery moves remain elusive below 1.1770, comprising 20-day EMA and a descending trend line from September 03. Meanwhile, a 10-month-long rising support line, near 1.1670, may challenge the quote’s short-term weakness ahead of a downward sloping trend line from March close to 1.1650.