EUR/USD bears eye 1.0850 support as US Dollar traces yields ahead of Fed’s preferred inflation

• EUR/USD takes offers to refresh intraday low, extend the previous day’s pullback from nine-month high.
• US data flashed mixed signals but rebound in Treasury bond yields puts a floor under US Dollar.
• Absence of ECB speak, cautious sentiment ahead of the key US data exerts downside pressure on Euro pair.

EUR/USD holds lower grounds for the second consecutive day as the US Dollar consolidates weekly losses ahead of the Federal Reserve's (Fed) favorite inflation number during early Friday. That said, the Euro pair renews its intraday low to around 1.0880 while extending the previous day’s pullback from the highest levels since April 2022.

US Dollar Index (DXY) picks up bids to 101.85 as it stretches the late Thursday‘s rebound after the upbeat prints of the US fourth-quarter (Q4) Annualized Gross Domestic Product (GDP), to 2.9% versus 2.6% expected and 3.2% prior. That said, the US 10-year and two-year Treasury bond yields also print the two-day uptrend around 3.51% and 4.19% respectively by the press time.

It should be noted that the downbeat prints of the US Personal Consumption Expenditures (PCE) details challenged the hawkish Fed concerns afterward and probe the EUR/USD bears. On the same line, comments favoring the European Central Bank’s (ECB) 0.50% rate hike ahead of the pre-meeting silence period also put a floor under the Euro pair.

On a different page, hopes of avoiding the US debt ceiling expiry, backed by the House Republicans’ readiness to push it back to September, seem to weigh on the EUR/USD price.

Against this backdrop, the S&P 500 Futures print mild losses while ignoring Wall Street’s gains.

Looking forward, the lack of clarity from the US data joins the hawkish concerns from the ECB to keep EUR/USD buyers hopeful unless the US Core PCE – Price Index for December, expected to remain unchanged at 0.2% MoM, flashes extremely downbeat figures.

Also read: US December PCE Inflation Preview: Is there room for further US Dollar weakness?

Technical analysis

Although a two-week-old bullish channel keeps EUR/USD buyers hopeful, a retreat by the RSI (14) line from overbought territory signals further downside toward the 10-DMA support near 1.0850.