EUR/USD eyes to regain 1.0700 post-Fed Minutes, US GDP in focus

• EUR/USD reverses pullback from monthly low, edges higher of late.
• Fed Minutes raised doubts on rate hikes after September, policymakers discussed 50 bps moves in next two meetings.
• ECB policymakers remain hawkish despite downbeat FSR statement.
• Second reading of Q1 2022 US GDP, Jobless Claims and housing data to decorate calendar amid multiple holidays in Europe.

EUR/USD stays on the way to reverse the pullback from a monthly high, picking up bids to 1.0685 during early Thursday morning in Asia. That said, the US dollar’s failures to cheer the latest Federal Open Market Committee (FOMC) Minutes contradict the Euro’s ability to cheer hawkish ECBSpeak to recall the pair buyers.

As per the Minutes of the May 03-04 Fed meeting, policymakers endorsed the 50 basis points (bps) of rate hikes for the next couple of meetings. However, statements like, “it would be appropriate to consider sales of mortgage-backed securities,” seemed to have raised doubts about the rate increases past September, which in turn weighed on the US dollar after release.

Additionally drowning the greenback was the US Durable Goods Orders for April. As per the latest US Durable Goods Orders, the growth slowed down to 0.4% MoM versus market forecasts and revised down prior readings of 0.6%. Also, the Core Durable Goods Orders rose 0.3% MoM versus 0.6% expected and 1.1% prior (revised).

On the other hand, European Central Bank (ECB) policymakers were more hawkish and underpinned the bloc’s currency despite the economic fears raised by the region’s Financial Stability Review (FSR). That said, Governing Council member Klass Knot mentioned, “A 50 bps rate hike in July is not off the table, he continued, while the option of holding rates steady is off the table.” On the same line, ECB Chief Economist Philip Lane reiterated on Wednesday that it was appropriate to normalize the monetary policy, as reported by Reuters. It should be noted that the FSR warned about an abrupt increase in real interest rates suggesting it could induce corrections in the real estate market.

Amid these plays, Wall Street closed on the positive side but the US 10-yer Treasury yields struggled to defend the bounce off the monthly low.

Looking forward, holidays in Europe and a light calendar in Asia may restrict catalysts for the EUR/USD pair. However, preliminary readings of the US Q1 2022 GDP, Weekly US Jobless Claims and the Pending Home Sales for April, coupled with the Fedspeak, may entertain traders during the late Thursday. Furthermore, Sino-American tussles, the Russia-Ukraine crisis and covid headlines are extra factors to watch for clear directions.

Technical analysis

Despite the latest rebound, the EUR/USD pair needs to cross the immediate hurdle, namely the 50-day EMA level surrounding 1.0740, to convince buyers to attack a downward sloping trend line from early February, near 1.0830 by the press time.

Alternatively, the early-month top around 1.0640 and a two-week-old rising support line, close to 1.0600, restrict the major currency pair’s short-term upside.