EUR/USD approaches 0.9930 hurdle on hawkish ECBspeak ahead of Fed announcements

• EUR/USD stays mildly bid, extending the November-start rebound from one-week low.
• ECB policymakers back further rate hikes despite citing recession fears.
• DXY fades US data-led rebound as yields remain pressured amid fears of slower rate hikes from December.
• US ADP Employment Change, second-tier EU/German data will offer intermediate directions.

EUR/USD grinds near intraday high surrounding 0.9900 as buyers struggle to keep the reins during early Wednesday morning in Europe. In doing so, the major currency pair defends the previous day’s rebound from the lowest level in a week but also stays appears dicey ahead of the key Federal Open Market Committee (FOMC) meeting.

That said, the major currency pair’s latest run-up could be linked to the market’s cautious optimism, as well as the hawkish comments from the European Central Bank (ECB) officials. However, firmer US data and anxiety about Fed’s verdict on its rate hikes from December seem to challenge the EUR/USD bulls.

ECB policymaker and Bundesbank President Joachim Nagel told a German newspaper that the central bank has a long way to go before it is done with interest rate hikes and it should also start reducing its oversized holding of government debt at the start of next year. On the same line, another ECB policymaker Pablo Hernandez de Cos mentioned that nobody knows how far we have to raise interest rates. Previously, ECB President Christine Lagarde said on Tuesday that the possibility of a recession has increased. The policymaker also added that they “haven't reached the destination on rates yet.”

Elsewhere, headlines from China appeared to have recently favored the market’s sentiment amid softer US Treasury yields. the Governor of the People’s Bank of China (PBOC), Yi Gang, recently crossed wires and stated that China's economy remains broadly on track. “We hope the housing market can achieve a soft landing,” added the policymaker. Additionally, an official from the China Banking and Insurance Regulatory Commission (CBIRC) also helped improve the mood while saying that the property sector is now "stable".

It’s worth noting that the US 10-year Treasury yields drop two basis points (bps) to 4.03% at the latest as traders remain divided over the US central bank’s next move given the 75 bps rate hike and hopes favoring easy rate lifts from December. While portraying the mood, S&P 500 Futures snap a two-day downtrend to print a 0.25% intraday upside by the press time.

Alternatively, firmer US data and hawkish bets on the Fed’s next move, per the CME’s FedWatch Tool, challenge the EUR/USD pair buyers. On Tuesday, the US JOLTS Job Openings increased to 10.717M in September versus 10.0M forecast and upwardly revised 10.28M previous readings. Further, US ISM Manufacturing PMI increased to 50.2 in October versus 50.0 market forecasts and 50.9 prior. On the same line, final readings of the US S&P Global Manufacturing PMI for October rose past 49.9 initial forecasts to 50.4 but stayed below 52.0 readings for the previous month.

Looking forward, the EUR/USD pair traders may take intermediate clues from the German trade and Eurozone PMIs ahead of the US ADP Employment Change for October, expected 193K versus 208K prior. However, major attention will be given to the Fed’s statements and Chairman Jerome Powell’s press conference as a 75 bps rate hike won’t be enough to recall the DXY bulls.

Also read: Fed November Preview: Is it time for a dovish signal?

Technical analysis

A one-week-old descending trend line restricts the EUR/USD pair’s immediate upside, close to 0.9930, while major attention is given to the five-week-old rising wedge bearish formation, currently between 1.0130 and 0.9840.