EUR/USD eases below 1.1300 amid firmer yields, Fed’s Powell eyed

• EUR/USD consolidates 2021’s biggest daily gains as US Treasury yields underpin USD rebound.
• NIH contradicts ECDC’s fears like Fed’s Bostic did to ECB’s Lagarde.
• Global scientists, policymakers placate fears of Omicron even as national border checks return to the table.
• German HICP inflation data, US President Biden and ECB’s Lagarde will be eyed too.

EUR/USD refreshes intraday low to 1.1274, down 0.43% on a day to reverse Friday’s virus-led rebound during early European morning on Monday.

The reason could be linked to the upbeat comments from the US versus the prevailing fears in the Eurozone. However, the pair traders remain cautious ahead of the preliminary reading of the German Harmonized Index of Consumer Prices (HICP) for November, expected 5.4% YoY versus 4.6% prior. Following that, speeches from European Central Bank (ECB) President Christine Lagarde, Federal Reserve Chairman Jerome Powell and US President Joe Biden will be crucial for near-term direction.

Having identified zero cases of the fresh COVID-19 infections in the US, the National Institutes of Health (NIH) officials renewed hopes that the virus vaccines, as well as the booster doses, can help overcome the latest challenge to the global economy. On the same lines were comments from Israeli Professor Dror Mevorach who terms ‘Omicron’ as less severe than the ‘Delta’ version of the coronavirus.

On the other hand, were statements from the European Centre for Disease Prevention and Control (ECDC), which crossed wires via Reuters during the weekend while saying, “The omicron variant is the most divergent variant in significant numbers.” “We are concerned omicron may significantly reduce vaccines' effectiveness and boost the risk of reinfections,” added ECDC.

The contradiction over virus woes is a reflection of the policymakers’ latest comments and supports the Fed versus ECB battle, which in turn favors the EUR/USD bears. That said, ECB’s Lagarde mentioned, per Reuters, "There is an obvious concern about the economic recovery [of the euro zone] in 2022, but I believe we have learned a lot.” Further, Atlanta Federal Reserve President Raphael Bostic spoke during the weekend as well while saying, “Covid is the source of inflation.”

Amid these plays, US 10-year Treasury yields rise 4.5 basis points (bps) to 1.53% while S&P 500 Futures add 0.80% gains on a day by the press time. It should be noted that the yields and the US stocks dropped the most since early pandemic days on Friday after the World Health Organization’s (WHO) announcement to mark it as a “variant of concern”.

Looking forward, the German inflation number for November may probe immediate declines of the EUR/USD prices but a likely continuation of the Fed versus ECB rate hike story may keep the major currency pair directed towards the south.

Technical analysis

Although the 10-DMA, around 1.1280 by the press time, restricts the immediate downside of the EUR/USD pair, recovery moves remain off the table until the quote stays below a monthly resistance line around 1.1445-50.