EUR/USD: Bulls and bears jostle around mid-1.0700s with eyes on US Inflation

• EUR/USD lacks momentum after rising to eight-month high.
• US Dollar rebounds despite softer US data on Fed Chair Powell’s hesitance to provide monetary policy clues.
• ECB policymaker appears hawkish but World Bank’s signal for recession probes them.
• China inflation decorates calendar, highlighting risk catalysts as the key.

EUR/USD treads waters around 1.0740 during the early hours of Wednesday’s Asian trading, after portraying a sluggish performance on Tuesday, as traders await the key catalysts for clear directions. Among them, the US Consumer Price Index (CPI) for December gains major attention.

The quote’s latest inaction could be linked to the US Dollar’s ability to hold the ground despite softer prints of the second-tier data. That said, the US NFIB Business Optimism Index for December dropped to the lowest levels since 2013 if ignoring multiple jitters during the global Covid wave. Further, US Wholesale Inventories also remained unchanged with 1.0% growth for November.

The reason for the US Dollar's strength could also be linked to Federal Reserve Chair Jerome Powell's hesitance at Riksbank's International Symposium on Central Bank Independence in offering further clarity on the US central bank’s monetary policy outlook. However, Federal Reserve Governor Michelle Bowman appeared hawkish while stating that more rate rises are needed to combat high inflation.

On the other hand, European Central Bank's (ECB) governing council member Mario Centeno said on Tuesday the current process of interest rate increases is approaching its end. However, another ECB Governing Council member Isabel Schnabel highlighted the need for a restrictive monetary policy stance.

It’s worth noting that the World Bank’s grim economic forecasts and expectations of upcoming recession also seemed to have probed the EUR/USD traders. That said, the World Bank stated that it expects the global economy to grow by 1.7% in 2023, down sharply from 3% in June's forecast, as reported by Reuters.

Amid these plays, the US 10-year Treasury yields rose 10 basis points (bps) to 3.61% and put a floor under the US Dollar even if Wall Street managed to close on the positive side.

Moving on, EUR/USD traders will pay attention to the risk catalysts amid a dearth of major data/events on the calendar ahead of Thursday’s US Consumer Price Index (CPI) data. However, today’s China inflation numbers may entertain intraday traders.

Technical analysis

EUR/USD portrays a Doji candlestick at the multi-month high, which in turn joins nearly overbought RSI levels to tease sellers unless the quote stays below 1.0760.