EUR/USD eases below 1.0700 as Fed Chair Powell’s Testimony looms

• EUR/USD portrays the pre-event anxiety after refreshing two-week high the previous day.
• Hawkish comments from ECB officials versus moderate Fed talks propel Euro pair.
• Recent improvement in US data, Treasury bond yields probe the pair buyers.
• Fed Chair Powell needs to defend the ‘higher for longer’ bias to recall Euro bears.

EUR/USD struggles for clear directions as it retreats from its intraday high to 1.0680 during the mid-Asian session on Tuesday. The major pair cheered the broad US Dollar weakness in the last two days to poke the highest levels in a fortnight. However, the cautious mood ahead of this week’s top-tier events seems to challenge the bulls of late.

Apart from the broad US Dollar weakness, hawkish comments from the European Central Bank (ECB) officials also allowed the EUR/USD pair to remain firmer. It’s worth noting that softer data at home contrasts with an improvement in the US statistics to probe the pair’s upside momentum and challenge the immediate moves.

That said, US Dollar Index (DXY) prints mild gains around 104.40 to snap a two-day downtrend. In doing so, the greenback’s gauge versus the six major currencies traces the recent rebound in the US Treasury bond yields.

US 10-year Treasury bond yields initially dropped to a one-week low of 3.897% on Monday before ending the day with mild gains near 3.96%, staying around the same level by the press time. On the same line, the two-year counterpart ended Monday’s North American trading session with 0.60% intraday gains at 4.88%, mostly unchanged at the latest.

Talking about the data, the Eurozone Sentix Investor Confidence index worsens to -11.1 in March from -8.0 in February and -8.6 expected. Further, the Current Situation in the Eurozone improved to -9.3 during the stated month, from -10.0 prior, whereas the Expectations Index tumbled to -13.0 from -6.0 in February. Eurozone Retail Sales grew by 0.3% MoM in February versus 1.0% expected and -1.6% prior while the YoY figures suggest the bloc’s Retail Sales arrived at -2.3% in February versus -2.8% seen in January and the 1.9% consensus forecast, per the official figures released by Eurostat showed on Monday.

On the other hand, US Factory Orders improved to -1.6% MoM in January versus -1.8% expected and -1.7% prior.

It should be observed that ECB President Lagarde told Spanish media group Vocento, per Reuters, “Underlying inflation in the Eurozone will stay high in the near term so a 50 basis point European Central Bank (ECB) interest rate increase later this month is increasingly certain.” However, when asked about a possible 50 basis points (bps) rate hike in March, European Central Bank (ECB) policymaker Centeno said that “the decision must be based on data.” Adding that the “interest rates have risen too fast.”

Elsewhere, the fears emanating from the likely Sino-American tension, due to the anticipated meeting of the US and Taiwanese Officials, join recent doubts about the Fed’s hawkish move to challenge the traders ahead of the key event.

Amid these plays, Wall Street closed mixed and the S&P 500 Futures also struggle for clear directions.

Moving ahead, Fed Chair Powell’s testimony will be crucial to watch for the EUR/USD pair traders. Fed’s Powell appears before the Senate Banking Committee on Tuesday and should defend the US central bank’s hawkish bias to recall the bears.

Technical analysis

Although the EUR/USD pair aptly portrays a clear bounce off the 200-day Exponential Moving Average (EMA), around 1.0540 by the press time, the pair’s upside moves appear elusive unless crossing the mid-January swing low surrounding 1.0766.