EUR/USD prints four-day losing streak below 1.0800 as ECB hawks retreat, US data, yields in focus

• EUR/USD drops for the fourth consecutive day as bears tighten grips amid firmer US Dollar.
• BoJ-led slump in yields helps US Dollar regain its strength.
• Firmer EU statistics allow ECB officials to ease hawkish bias.
• US data can add to upside strength in case of firmer outcome for December.

EUR/USD stays on the bear’s radar as it slides to 1.0770 during the four-day south-run heading into Wednesday’s European session. In doing so, the major currency pair bears the burden of the broad US Dollar rebound, as well as receding hawkish bias over the European Central Bank’s (ECB) next move.

That said, the US Dollar Index (DXY) braces for the biggest daily gains in two weeks, up for the third consecutive day around 102.90 by the press time. In doing so, the greenback’s gauge versus the six major currencies cheers a slump in the Treasury yields triggered by the Bank of Japan’s (BoJ) inaction.

US Treasury bond yields as they reverse the early-day rebound to drop towards 3.48% while the S&P 500 futures printed 0.30% intraday gains, following the mildly negative marks of the intraday performance. On the same line, Japanese Government Bonds (JGB) slumped to 0.362% after the BoJ announcements from 0.50% just before the BOJ.

Additionally favoring the US Dollar is the receding optimism surrounding China as expectations of upbeat growth figures from China, as conveyed by economists from Goldman Sachs, contrast the fears of more Sino-American tussles over Taiwan to probe China-linked optimism. Earlier in the day, South China Morning Post (SCMP) mentioned that Beijing ‘should be wary’ as the US and Taiwan seeks closer economic ties.

At home, Bloomberg’s news triggered swirling talks of the European Central Bank’s (ECB) slower rate hike starting after February and weighed on the Euro (EUR). “ECB policymakers are starting to consider a slower pace of interest-rate hikes after a likely 50 basis-point step in February,” said Bloomberg. The news might have taken clues from the recently positive data from Germany and Eurozone, as well as mixed comments from the ECB policymakers.

On Tuesday, German ZEW headline numbers showed that the Economic Sentiment Index returned to positive territory, arriving at 16.9 in January from -23.3 in December, beating the market expectation of -15.5. On the other hand, the ZEW Economic Sentiment Index for the Eurozone rose to 16.7 from -23.6. 

It should be noted that ECB board member and Bank of Portugal Governor Mario Centeno said the previous day, “The fourth quarter growth in Europe will be most likely still positive.” On the contrary, Chief Economist Phillip Lane told the Financial Times (FT) that interest rates do have to be higher than they are now.

Considering, the EUR/USD bears are likely to regain control. However, it all depends upon how well today’s US Retail Sales and PPI for December, expected 0.1% and -0.1% MoM versus -0.6% and 0.3% respective priors, could propel the US Dollar.

Technical analysis

One-month-old previous resistance line joins the 21-DMA to highlight 1.0680 as the short-term key support for the EUR/USD bears to crack.