EUR/USD sellers flirt with 0.9900 at 19-year low, focus on ECB, Fed’s Powell

• EUR/USD steadies at the lowest levels in two decades as bears keep riens.
• Recession fears, firmer US data favor sellers ahead of the key events.
• ECB is likely to announce 0.50% rate hike, Fed’s Powell may defend aggressive policies.
• Updates on stimulus packages from Europe and the US, second-tier data may entertain traders ahead of the key Thursday.

EUR/USD treads water around 0.9900 after refreshing the 19-year low the previous day as traders await the European Central Bank (ECB) monetary policy meeting and a speech from Fed Chairman Jerome Powell. Also restricting the major currency pair’s latest moves are mixed concerns during Wednesday’s Asian session.

Russia’s pause to all oil/gas exports to the European Union (EU) and firmer US ISM Services PMI enabled the EUR/USD bears to cheer a fresh multi-year low. In doing so, the quote ignored the policymakers’ signals for more stimulus measures to defend the energy companies and the public from the energy crisis.

That said, US ISM Services PMI rose to 56.9 versus 55.1 market forecast and 56.7 prior. However, the S&P Global Composite PMI and Services PMI eased to 44.6 and 43.7 respectively versus 45.0 and 44.1 initial forecasts in that order. Even so, the US Dollar Index (DXY) rose after the release and refreshed a 20-year high.

It should be noted that the mixed comments from the ECB policymakers and downbeat German Factory Orders for August, -13.6% YoY versus -6.1% expected and -9.0% prior, also weighed on the EUR/USD prices.

“Eurozone inflation is close to its peak,” ECB Governing Council member Yannis Stournaras said on Tuesday. Further, ECB policymaker Martins Kazaks said in an interview with Eurofi magazine on Tuesday that the “ECB will hike above a neutral rate if needed.” However, he added that a broad and protracted recession could slow rate hikes. Meanwhile, Governing Council member Mario Centeno said that “the ECB may achieve inflation goal with slow normalization.”

Against this backdrop, Wall Street closed in the red while the 10-year US Treasury yields jumped the most in a month to poke the highest levels since mid-June.

Looking forward, final readings of the Eurozone’s second quarter (Q2) Gross Domestic Product, expected to confirm 0.6% QoQ and 3.9% YoY prints, will precede Fedspeak to entertain EUR/USD traders. However, major attention will be given to the ECB’s action and Fed’s Powell as recession fears challenge the policy hawks.

Technical analysis

A sustained downside trading below July’s low near 0.9950 directs EUR/USD towards the 61.8% Fibonacci Expansion (FE) of May-August moves, near 0.9845. Also acting as an immediate support is the December 2002 low of around 0.9860.