EUR/USD probes three-day downtrend near 0.9750 as DXY retreats ahead of US inflation, Fed Minutes

• EUR/USD remains directionless at one-week low, retreats from intraday high of late.
• DXY eases amid the US holiday but fears of EU recession, dovish ECB bets challenge the pair buyers.
• US CPI, FOMC Minutes will be crucial for near-term directions but bears are likely to keep the reins.

EUR/USD bears take a breather around mid-0.9700s, following a three-day downtrend, as an extended holiday in the US probes the sellers amid a sluggish Monday. Also likely to have put a floor under the prices could be the cautious mood ahead of this week’s Federal Open Market Committee (FOMC) Minutes and the US Consumer Price Index (CPI) for September.

That said, the US Dollar Index (DXY) struggles around a one-week high after rising for the last three consecutive days. In doing so, the greenback gauge pauses the previous week’s reversal of the 20-year high, marked late in September.

While the US holiday probed the DXY bulls, China’s return and the market’s chatters over the global central banks’ likely pause in the rate hike trajectory, ex-Fed, seemed to have also probed the EUR/USD bears of late.

It’s worth noting that Friday’s US jobs report bolstered the hawkish Fed bets while the Reserve Bank of Australia’s (RBA) lesser-than-forecast rate hike and the European Central Bank’s (ECB) Monetary Policy Meeting accounts challenged the rate hike expectations elsewhere.

The US jobs report for September showed that the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions, as well as weighing on the market’s mood, was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior. Following that, the CME’s FedWatch tool signals the 78% chance for the US central bank’s 75 bps rate hike in November.

On the other hand, the ECB Monetary Policy Meeting Accounts mentioned that some officials preferred a wider rate hike of 50 bps, versus the 75 bps announced. Also likely to have helped the EUR/USD bears could be the downbeat prints of the Eurozone Retail Sales and German statistics, not to forget the fears of economic slowdown in the bloc due to the looming energy crisis. It should be noted that the old continent announced fresh sanctions on Russian oil during the last week and amplified the energy fears whereas the latest explosion on the Crimean bridge adds strength to the geopolitical fears.

Against this backdrop, the S&P 500 Futures dropped for the fourth consecutive day while poking the monthly low near 3,630, down 0.40% intraday at the latest. That said, the US 10- Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90%.

Looking forward, this week’s annual meetings of the International Monetary Fund (IMF) and the World Bank (WB), as well as updates on Russian President Vladimir Putin’s emergency meeting, on Monday, could entertain the pair traders ahead of the US inflation data and the Fed minutes. However, the bears are likely to keep the reins as the US economy has fewer challenges as compared to the oil continent.

Technical analysis

EUR/USD portrays the sixth pullback from the 50-DMA hurdle, around 0.9990 at the latest, which in turn joins the bearish MACD signals to direct sellers towards the yearly low of 0.9535 before highlighting the September 2001 top near 0.6335.