EUR/USD halts two-day run-up past 1.0800 on firmer USD, focus on German inflation clues

• EUR/USD retreats from weekly top, prints mild losses while snapping two-day uptrend.
• Mixed sentiment, month-end positioning allow US Dollar to lick its wounds amid firmer US Treasury bond yields.
• Comparatively more hawkish ECB talks than the Fed counterpart keep buyers hopeful unless German, European HICP disappoints.

EUR/USD witnesses headwinds at the weekly top as Euro traders remain cautious ahead of the key German clues. Adding strength to the pullback moves could be firmer yields and a rebound in US Dollar amid mixed sentiment. That said, the Euro pair eases to 1.0835, printing mild losses during early Wednesday, as it snaps a two-day winning streak.

US Dollar Index (DXY) picks up bids to 102.60 while printing the first daily gains in three. In doing so, the greenback’s gauge versus the six major currencies traces upbeat US Treasury bond yields amid mixed US data and the market’s indecision.

It’s worth noting that the Silicon Valley Bank (SVB) deal and policymakers’ efforts to defend their respective banking system, not to forget the central banks’ confirmations that the financial crisis is off the table, keep the market cautiously optimistic. However, the latest geopolitical fears emanating from China, mainly due to the US blacklisting some more Chinese companies, join the upbeat US inflation expectations to weigh on the EUR/USD price.

On the same line was the news that French authorities raided five banks on tax avoidance and money laundering concerns, as well as the talks surrounding the $5.4 million Credit Default Swap (CDS) trade of Deutsche Bank.

Talking about the data, US Conference Board (CB) Consumer Confidence rose to 104.2 in March, versus 101.0 expected and an upwardly revised prior figure of 103.4. Further, US Housing Price Index rose 0.2% MoM in January versus -0.6% expected and -0.1% prior while the S&P/Case-Shiller Home Price Indices matched 2.5% YoY forecasts for the said month compared to 4.5% previous readings.

Against this backdrop, US 10-year and two-year Treasury bond yields print a three-day uptrend around 3.58% and 4.10% respectively while the S&P 500 Futures print mild gains, the first in three.

Looking ahead, EUR/USD may witness further pullback amid fresh challenges to sentiment and upbeat US inflation expectations, per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED).

However, the European Central Bank (ECB) officials have been more hawkish than their Federal Reserve (Fed) counterparts and hence firmer prints of inflation data can allow the EUR/USD buyers to return to the table. On Tuesday, ECB policymaker Madis Muller said that “although inflation is decreasing, it is still too soon to declare success.” On the same line were comments from Andrea Enria, Chair of the Supervisory Board of the European Central Bank (ECB), who said on Tuesday that direct exposure to Credit Suisse is relevant but manageable.

Moving on, Germany’s GfK Consumer Confidence Survey for April will be crucial for providing initial signals for Thursday’s inflation numbers. Following that, second-tier statistics from the US will be important to watch for clear directions.

Technical analysis

Although a two-month-old horizontal resistance challenges EUR/USD buyers around 1.0930, the 10-DMA level surrounding 1.0770 puts a short-term floor under the Euro pair.