EUR/USD bears approach 1.0900 as yields propel USD, focus on Ukraine, NFP
- EUR/USD takes offers to renew eight-day low, down for the fourth consecutive day.
- US 10-year Treasury yields refresh three-year high as hawkish Fedspeak continues.
- US, Germany try to placate fears of regime change in Russia, Shanghai announced fresh lockdown.
- Inflation, geopolitical woes weigh on statistics, underpinning the fears of NFP disappointment and USD pullback.
EUR/USD prints a four-day downtrend to please sellers around 1.0950 during Monday’s Asian session. In doing so, the major currency pair drops to the lowest levels in eight days as risk-aversion joins firmer Treasury bond yields.
That said, the US 10-year Treasury yields rise 5.4 basis points (bps) to the highest levels since May 2019, around 2.54% by the press time. The bond coupons favor the US Dollar Index (DXY) to cross a three-week-old descending resistance line while poking 99.15 at the latest.
It’s worth noting that fueling the bond coupons are expectations that the global central bankers, led by the Fed, will portray aggressive monetary policy tightening to battle the reflation woes.
While digging deeper, it can be known that the US inflation expectations per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, refreshed record top on Friday.
Also weighing on the EUR/USD prices is the US dollar’s safe-haven demand amid tensions between the West and Russia, as well as indecision over the Moscow-Kyiw talks. The comments from US President Joe Biden suggesting the indirect threat to the Russian President Vladimir Putin’s position triggered risk-off mood during the early Asian, even as the White House and Germany tried to placate the fears.
On the same line were the mixed updates over this week’s peace talks in Turkey as Ukrainian President Volodymyr Zelenskyy pushed for the progress of the Ukraine-Russia peace talks by saying, “We're ready to discuss neutrality and non-nuclear status if security guarantees are provided.” However, his statements like, “Ukraine to insist on sovereignty and territorial integrity with talks with Russia,” challenges the odds of success. Also dragging the market’s risk appetite and the EUR/USD prices are the downbeat covid updates from China and Europe.
Talking about data, downbeat data relating to consumer sentiment and the housing market from the US challenge the greenback buyers. However, the latest IFO numbers from Germany aren’t upbeat either, which in turn keeps EUR/USD bears hopeful.
Amid these plays, the S&P 500 Futures retreat from a seven-week high, down 0.33% intraday around 4,521 by the press time.
It should be noted that this week’s US jobs report becomes more important considering the hawkish Fedspeak and recently softer data, amid the geopolitical crisis. Also likely to direct EUR/USD traders are the risk catalysts, mainly from Russia and concerning the coronavirus.
Technical analysis
A clear downside break of a three-week-old rising trend line, around 1.1095, joins the EUR/USD pair’s sustained trading below the 21-DMA, near 1.1015 at the latest, to keep bears hopeful of meeting the mid-March low of 1.0900.