EUR/USD picks up bids to 1.1600 amid softer US Treasury yields

• EUR/USD extends the week’s rebound amid cautious optimism.
• Downbeat US inflation expectations, stimulus hopes favor bulls amid a quiet session.
• Second readings of the EU, German PMIs may entertain traders before Wednesday’s Fed verdict.

EUR/USD refreshes intraday top beyond 1.1600 ahead of Tuesday’s European session amid mixed concerns. Even so, the bulls hesitate to retake controls ahead of the key Federal Reserve (Fed) meeting, up for publishing on Wednesday.

With a four-day pullback from a 15-year high in the US inflation expectations, as portrayed by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, the market’s hope of the Fed tapering and/or rate hikes take a back seat of late. However, the Fed Clevland’s version of the median PCE Inflation rate rockets higher of late, allowing the US Federal Reserve (Fed) hawks to remain hopeful.

It’s worth noting that the downbeat US PMIs jostle with China’s recent appeal to store food during winter to challenge the EUR/USD buyers, due to the US dollar’s safe-haven appeal. Though, softer Treasury yields, down 2.5 basis points (bps) to 1.549% weigh on the US Dollar Index (DXY), helping EUR/USD to extend the previous day’s rebound.

Despite firmer Treasury yields, the equity futures remain mildly offered amid cautious sentiment during the pre-Fed anxiety. Also challenging the stocks is the uncertainty over US President Joe Biden’s stimulus despite the Democratic leader’s recent optimism.

Talking about data, the US PMIs were mixed but the German Retail Sales slumped in September, helping the ECB to stand pat. Also restricting further consolidation of the easy monetary policy in the bloc is the recently higher COVID-19 infections in Germany.

Looking forward, second readings of October’s PMI for Germany and Europe may entertain EUR/USD traders. However, major attention will be given to the stimulus and inflation chatters, not forgetting the central bank headlines.

Technical analysis

Unless crossing a one-month-old ascending resistance line near 1.1695, EUR/USD bears are likely to keep the reins.