EUR/USD grinds higher past-1.1400 as USD tracks softer yields, inflation eyed

• EUR/USD snaps two-day downtrend but stays negative on weekly, grinds higher around intraday top of late.
• US Treasury yields retreat from the highest levels since July 2019, Fed’s Daly placates inflation fears.
• ECB’s Villeroy criticized hawkish reaction to the latest monetary policy verdict.
• Fed Cleveland President’s speech, German trade numbers may offer intraday moves.

EUR/USD struggles to keep intraday gains, recently taking rounds to 1.1430 during early Wednesday morning in Europe.

Even so, the major currency pair remains firmer for the first time in three days as the US dollar follows the Treasury yields amid a quiet session.

That said, US Dollar Index (DXY) drops 0.12% intraday around 95.50 at the latest as the US Treasury yields retreat from the multi-day high flashed the previous day.

It’s worth noting that the market’s indecision over the next moves of the European Central Bank (ECB) and the US Federal Reserve (Fed), due to the inflation concerns, seem to have probed the EUR/USD pair’s recent advances.

US 10-year Treasury yields jumped to the highest levels since July 2019 the previous day before recently easing to 1.945%. The bond coupon eased even after San Francisco Fed President Mary Daly favored the March rate hike in her latest speech. The policymaker additionally mentioned, “Fed can't be overly aggressive on rate increases,” while saying, “US inflation could get worse before it gets better.”

At home, European Central Bank (ECB) governing council member and Bank of France's head Francois Villeroy de Galhau said on Tuesday that the market reaction to last week's ECB meeting may have been too strong. The latest words from the ECB policymaker copy the early-week comment from ECB President Christine Lagarde who took a U-turn from rate-hike concerns.

It’s worth noting that covid optimism seems to have favored the EUR/USD buyers while portraying a corrective pullback. Earlier in the day, US President’s Chief Medical Adviser Dr. Anthony Fauci said, per the Financial Times (FT), “The US is heading out of the ‘full-blown’ pandemic phase of Covid-19.”

Looking forward, German trade numbers for January will join the Fedspeak to direct intraday moves ahead of the weekly key data/events scheduled for publication on Thursday. Among them, quarterly economic forecasts from the European Commission and the US Consumer Price Index (CPI) will be crucial to watch.

Technical analysis

Failures to cross a three-month-old horizontal hurdle surrounding 1.1485 keep directing EUR/USD bears towards a 21-DMA level near 1.1340, a break of which will confirm short-term bearish bias towards 1.1360.