- EUR/USD fades bounce off monthly low, eases from intraday high of late.
- Risk appetite turns cautious ahead of the key US CPI for August.
- Chatters surrounding Fed’s tapering, geopolitics and virus entertain intraday traders.
- Bears remain hopeful but risk catalysts and the pre-Fed caution may challenge the downside.
EUR/USD aptly portrays the market’s indecision ahead of crucial US inflation data heading into Tuesday’s European session. The currency major dropped to the lowest since August 27 the previous day before bouncing off 1.1770. The rebound, however, remains capped at around 1.1810 so far during the day.
On Monday, the European Central Bank (ECB) Executive Board member Isabel Schnabel, during a scheduled speech this Monday, said that inflation will noticeably decrease as soon as next year. The statements should have ideally helped the EUR/USD buyers but were rather ignored on the Fed tapering concerns.
However, China’s growing assertiveness in diplomatic relations with the global leaders joins vaccine optimism, as signaled by the representatives of the crucial economies at the World Economic Forum (WEF) on Monday, to challenge the risk-off mood and keeping the corrective pullback.
Even so, the last week’s record US Producer Price Index (PPI) data and the early week comments from Philadelphia Federal Reserve Bank President Patrick Harker challenges the pair buyers as the favor dialing back of the Fed’s easy-money policy.
Elsewhere, the European Union’s (EU) rush towards deeper diplomatic and economic ties with the Indo-Pacific nations after the US militaries left Afghanistan, per Nikkei Asia news.
Amid these plays, the US 10-year Treasury yields stay firmer around 1.336% while S&P 500 Futures print mild intraday gains by the press time.
Moving on, EUR/USD bears will seek firmer figures of the US Consumer Price Index (CPI) for August while softer data needs back-up from the next week’s Fed meeting to convince the pair buyers.
Read: US Inflation Preview: CPI critical for taper, three scenarios for the dollar
Technical analysis
Although 20-day EMA restricts immediate EUR/USD downside around 1.1800, the pair buyers remain unconvinced below the 200-day EMA level of 1.1885. That said, multiple levels marked since late July, around 1.1750, adds to the downside filters before dragging the quote to the yearly low surrounding 1.1665.