EUR/USD: Recovery remains capped below 1.0550, focus shifts to Powell

• EUR/USD is struggling to extend Monday’s rebound in the Asian session.
• The US dollar corrective mode remains intact amid an improved mood.
• Lagarde waters down hopes for a double-dose rate hike in July.

EUR/USD is preserving most of Monday’s gains, consolidating below 1.0550 so far this Tuesday. Risk sentiment remains in a firmer spot, weighing negatively on the safe-haven US dollar.

Markets are unwinding their USD long positions, as global stocks stabilize after the previous week’s turmoil and following the hawkish Fed’s monetary policy announcement. Investors gear up for another round of dollar buying, with Fed Chair Jerome Powell’s testimony scheduled before the Congress on its semi-annual Monetary Policy Report on Wednesday and Thursday.

The prepared remarks of Powell’s testimony will be published later this Tuesday. A renewed bid wave may emerge in the dollar should the central bank Chief reinforce his pledge to fight inflation, hinting at a 0.75 bps rate hike in July.

Meanwhile, EUR bulls turn cautious after ECB President Christine Lagarde watered-down expectations of a double-dose rate hike at its next policy meeting in July, citing that they intend to raise key rates by 25 bps next month. Further, looming fragmentation and recession risks in the euro area also keep the euro’s upside attempts in check.

On the data front, the Eurozone Current Account data and US Housing data will be on the cards.

EUR/USD technical levels to consider