EUR/USD slides below 1.0200 on hawkish Fedspeak, US-China jitters

• EUR/USD takes offers to refresh weekly low, extends the previous day’s pullback from monthly top.
• Fed policymakers appear hawkish, Bullard reiterated central bank’s commitment to inflation target.
• China resents US House Speaker Nancy Pelosi’s Taiwan visit.
• EU/US PMIs for July, Eurozone Retail Sales and US Factory Orders will decorate the calendar.

EUR/USD holds lower ground near 1.0150, refreshes weekly low, as bears cheer the market’s risk-off mood, as well as hawkish comments from the Fed policymakers during Wednesday’s Asian session. That said, the major currency pair dropped the most in more than a week, after taking a U-turn from the monthly high, the previous day.

Geopolitical tensions between the US and China, recently over Taiwan, exert more downside pressure on the market sentiment, as well as on the EUR/USD prices, especially at a time when the global economy is fragile. Also, the Federal Reserve (Fed) policymakers aren’t following Chairman Jerome Powell’s tunes and show no major signs of retreat from the rate-hike trajectory.

China showed irritation over US House Speaker Nancy Pelosi’s visit to Taiwan and raised fears that the tussles among the world’s top-two economies will have more negative consequences for the world amid recession fears. “US House of Representatives Speaker Nancy Pelosi arrived in Taiwan late on Tuesday on a trip she said shows an unwavering American commitment to the Chinese-claimed self-ruled island, but China condemned the highest-level U.S. visit in 25 years as a threat to peace and stability in the Taiwan Strait,” said Reuters.

Other than the Taiwan issue, talks of likely US restrictions on the chip-making machinery’s exports to China also magnified the Sino-American tussles. It’s worth noting that Beijing’s policymakers also showed a lack of confidence in this year’s Gross Domestic Product (GDP) and weighed on the EUR/USD prices, mainly due to the US dollar’s safe-haven demand.

Elsewhere, St. Louis Federal Reserve President James Bullard’s support for the hawkish Fed moves appeared to recently weigh on the EUR/USD prices. “Federal Reserve and the European Central Bank may both be able to execute a "relatively soft landing" that avoids a harsh recession for their respective economies as they raise interest rates to rein in inflation,” the policymaker said.

On Tuesday, San Francisco Fed President Mary Daly said that she is looking for incoming data to decide if they can downshift the rate hikes or continues at the current pace, as reported by Reuters. However, Chicago Fed President Charles Evans showed support for a 50 basis points (bps) rate hike for the September policy meeting if inflation does not improve, as reported by Reuters. Furthermore, Cleveland Fed President Loretta Mester, on the other hand, said she does not think the country is suffering a recession, adding that the labor market is in great shape. On inflation, however, she noted that it has not decreased "at all."

Amid these plays, Wall Street closed in the red and the US Treasury yields bounced off a four-month low.

Moving on, July month activity numbers from the Eurozone and the US will join German trade data and the Retail Sales from the bloc to entertain EUR/USD traders ahead of the US session. Following that, the US Factory Orders and ISM Services PMI will be crucial to watch for fresh directions.

Technical Analysis

EUR/USD confirms a rising wedge bearish chart pattern on breaking a three-week-old support line, now resistance around 1.0180, which in turn signals the pair’s further declines towards refreshing the yearly low surrounding 0.9950.