EUR/USD skates on thin ice below 1.0400 ahead of US Michigan Consumer Sentiment

• EUR/USD stabilizes around five-year low after positing the biggest daily loss since March 2020.
• US PPI, Fedspeak seems to have favored a rebound in Treasury Yields, stock futures but the bears stay hopeful.
• ECB policymakers renew July rate hike concerns but tussles with Russia, economic fears weigh on Euro.
• US consumer sentiment gauge for May, EU’s verdict on Russian oil embargo and ECBspek will be eyed for fresh impulse.

EUR/USD licks its wounds near 1.0380, after refreshing a five-year low the previous day, as global markets consolidate recent moves amid an absence of major catalysts during Friday’s Asian session.

The major currency pair’s latest daily fall, the biggest in 26 months, challenges the buyer’s return ahead of the short-term key US consumer sentiment gauge for May, as well as comments from European Central Bank (ECB) Vice President Luis De Guindos.

The reason for the latest anxiety among EUR/USD traders could be linked to the divergence in comments from the Fed and the ECB policymakers. That said, the ECBspeak has recently turned hawkish by highlighting the July rate hike concerns whereas Fed Chairman Powell and San Francisco Fed President Mary Daly seem trying to compress the odds favoring the 75 basis points (bps) of a rate hike.

It’s worth noting that an absence of major positives from the US Producer Price Index (PPI) for April, which matched 0.5% MoM forecasts, also could be linked to the latest rebound in the EUR/USD prices.

Amid these plays, the US 10-year Treasury yields portray a corrective pullback after refreshing a two-week low on Thursday, around 2.89% by the press time, whereas the S&P 500 Futures rise 0.75% intraday while licking its wound near one-year low.

Looking forward, comments from ECB Vice President Luis De Guindos will be the first to direct EUR/USD moves before the preliminary readings of US Michigan Consumer Sentiment data for May, expected 64 versus 65.2 prior. While ECB’s De Guindos will be eyed for more clarifications for a rate hike, US data should remain firmer to keep the EUR/USD bears hopeful.

Read: Michigan Consumer Sentiment Index May Preview: Can Americans keep their spending habits?

Additionally, the European Union (EU) is yet to officially approve the oil embargo on Russia's energy imports and the decision on the same was to be made this week. Any updates on the same, coupled with the chatters over Finland’s joining of NATO and Ukraine tension, will also be eyed for fresh impulse.

Technical analysis

A clear downside break of the 2017 bottom of 1.0340 becomes necessary for the EUR/USD bears to keep reins. Otherwise, oversold RSI may play the role of activating a corrective pullback targeting the last monthly low near 1.0470.