EUR/USD clings to the 1.0900 mark ahead of Fed minutes

• The shared currency remains subdued in the North American session but holds to the 1.0900 level amidst a risk-off mood.
• Contraction in China’s Caixin Manufacturing and Services PMIs looms as a signal of global economic deceleration.
• EUR/USD Price Forecast: A break below 1.0900 would exacerbate a downward move towards 1.0806.

The EUR/USD remains in choppy trading as market players prepare for the release of the FOMC March’s meeting minutes, but earlier gave way for USD bulls, as it broke below the 1.0900 mark during the European session, but reclaimed the latter in the North American session. At the time of writing, the EUR/USD is trading at 1.0905, barely flat.

Downbeat market mood and Fedspeaking boosts the greenback

The market sentiment is downbeat, as European equities finished with losses, while across the pond, the history is the same. In the Asian session, news that China’s Caixin Services for March fell below the 50 levels, in the same tenure as Monday’s Manufacturing reading, concerns market players. The recent China Covid-19 outbreak threatens to push the brakes on the global economic recovery.

Elsewhere, the hawkish Fed speaking in the week dragged global equities down while bond yields rose. On Wednesday, Fed’s Governor Lael Brainard spooked the markets, commenting that the balance sheet reduction might begin in the May meeting, something unexpected by traders as they were looking to QT to start in the July meeting. Meanwhile, Kansas City Fed Esther George said that a 50 bps move would be an option we must consider and emphasized that conditions favor going faster than before.

Money market futures portrays market players’ response to Brainard’s remarks -one of the doves of the FOMC. The CME FedWatch Tool shows that investors have priced a 75.5% chance of a 50 bps rate hike in the May meeting, which will lift the Federal Funds Rate (FFR) to 1%.

Meanwhile, the US Dollar Index, a gauge of the greenback’s measure against a basket of its rivals, retreats from YTD highs, down 0.05%, sitting at 99.443. Contrarily, the US Treasury yields are rising.

The 10-year benchmark note sits at 2.586%, up one basis point but short of the YTD high at 2.66%, as market players expect the release of March’s monetary policy minutes.

On the Geopolitical front, the fighting continues in Eastern Europe. Moscow said that work is ongoing when the next round of discussions with Ukraine occurs.

EUR/USD Price Forecast: Technical outlook

The EUR/USD downtrend remains intact and is accelerating towards a retest of the YTD low at 1.0806, as shown by the 300-pip fall in the last five trading days. Furthermore, the Relative Strength Index (RSI) at 38.94 below the 50-midline is in bearish territory, with enough room to spare before RSI reaches oversold conditions if the event of the EUR/USD aiming lower.

That said, the EUR/USD first support level would be 1.0900. A clear break would expose the YTD low at 1.0806, followed by April 2020 cycle lows at 1.0727 and then the Covid-19 pandemic outbreak lows in March 2020 at 1.0636.