EUR/USD defends 1.1685-80 support with eyes on ECB’s Lagarde, Fed’s Powell

• EUR/USD consolidates early Asian losses, rebounds from short-term key support.
• Market sentiment improves amid hopes over US stimulus, China’s Evergrande.
• US Treasury yields refresh three-month top, favoring US dollar bulls.
• Fed tapering concerns, ECB’s optimism stay on the table but PBOC’s hopes of overcoming real-estate woes in focus.

EUR/USD licks its wounds around 1.1690 heading into Tuesday’s European session open. In doing so, the major currency pair struggles around a short-term key hurdle to the yearly bottom amid mixed clues.

The Fed tapering chatters renew after Chairman Jerome Powell, in his prepared remains for today’s testimony, cited inflation and employment concerns to say, “We would certainly respond and use our tools to ensure that inflation runs at levels that are consistent with our goal."

On the other hand, uncertainty over the US infrastructure spending bill and the Democrats’ inability to pass a bill pushing back the debt limit expiry underpin the US dollar’s safe-haven demand. Also challenging the market sentiment, as well as favoring the USD, are the World Bank comments signaling economic fears for Asia-Pacific, including China.

Alternatively, the People’s Bank of China (PBOC) battles the Evergrande woes and keeps the market players hopeful of overcoming the threat to the world’s second-largest economy.

Elsewhere, the German elections portrayed a political limbo and hence investors are expecting further easy money to form a strong coalition government. “After Finance Minister Olaf Scholz’s center-left Social Democrats (SPD) narrowly defeated the ruling Christian Democratic bloc (CDU/CSU) in Sunday’s election, both parties will woo the Greens and the pro-business Free Democratic Party (FDP) to form a coalition,” said Reuters.

It’s worth noting that the US Durable Goods Orders came in firmer for August while the European Central Bank (ECB) President Christine Lagarde tamed reflation fears during her latest speech.

Amid these plays, US 10-year Treasury yields refresh multi-day top, up 2.2 basis points (bps) around 1.51% by the press time, while the S&P 500 Futures reverse the early Asian session losses at the latest. That said, the US Dollar Index (DXY) prints a three-day uptrend but mixed concerns ahead of Fed Chair Jerome Powell’s testimony and ECB President Lagarde’s additional comments keep EUR/USD bears cautious. Also important is the monthly Consumer Confidence figures from the Conference Board.

Read: Conference Board Consumer Confidence Preview: Unhappy but still spending

Technical analysis

EUR/USD bears take a breather around a one-week-old horizontal support zone near 1.1685-80 following its pullback from a monthly resistance line and 10-DMA, currently around 1.1730. However, bearish MACD signals and double-top formation around 1.1910 keep the pair sellers hopeful to refresh the yearly low bottom, currently around 1.1665.