EUR/USD fades bounce off 14-month low around 1.1550, US debt ceiling standoff eyed
- EUR/USD retreats from intraday high towards multi-month low, stays pressured of late.
- Downbeat Eurozone fundamentals battle firmer clues for Fed tapering to favor bears.
- DXY follows back firmer Treasury yields amid cautious sentiment.
- US debt limit extension will be voted in the Senate, stretch till December in focus.
EUR/USD struggles to extend the corrective pullback from July 2020 levels, tested the previous day, while easing to 1.1550 heading into Thursday’s European session.
The major currency pair refreshes multi-day low on Wednesday before bouncing off 1.1529. The recovery moves, however, can’t ignore the USD rebound amid cautious sentiment ahead of the key data/events.
The US Democrats’ last ditched efforts to overcome the debt ceiling deadlock paid well after Senate Republican Leader Mitch McConnell favored a short-term extension till December. However, some among the Republican Party keep their dislikes for US President Joe Biden’s infrastructure spending bill proposals and hence sentiment turns cautious ahead of today’s voting. Given the Democrats’ push for the agreement and McConnell's recent shift, the vote may have more assents and can favor the risk-on mood on passing.
Headlines concerning improvement in the Sino-American relations, mainly circulated via Chinese media, also previously added to the risk-on mood and weighed on the US dollar’s safe-haven demand. However, US Secretary of State Antony Blinken’s dislike for China’s action over the Taiwan issue and a push to act responsibly in the matters relating to Evergrande probe the optimists of late.
Elsewhere, downbeat German Factory Orders and reflation fears, not to forget volatile gas prices and supply chain issues, dragged the regional currency yesterday, providing support to the US dollar before the late night’s risk-on mood. On the same line, the US ADP Employment Change jumped to a three-month high and propelled hopes for a firmer US Nonfarm Payrolls (NFP), up for publishing on Friday.
Against this backdrop, S&P 500 Futures rise 0.51% while the US 10-year Treasury yields gain 1.2 basis points to 1.536% at the latest. The US Dollar Index (DXY) steadies around 94.25 by the press time.
Looking forward, German Industrial Production and comments from the European Central Bank (ECB) policymakers will precede the ECB Monetary Policy Meeting Accounts to entertain the EUR/USD traders. However, major attention will be given to US Jobless Claims and updates from the Senate before the markets gear up for Friday’s US jobs report for September.
Technical analysis
EUR/USD remains below a two-week-old resistance line near 1.1590 while also keeping the last week’s downside break of a support line from March, now resistance around 1.1650, amid bearish MACD signals. Hence, sellers have odds to outnumber bulls.