EUR/USD bulls attack 0.9800 as ECB’s QT, US Retail Sales loom

• EUR/USD pokes 10-DMA hurdle around weekly high, up for the second consecutive day.
• Softer yields exert additional downside pressure on DXY.
• ECB policymakers discuss balance sheet normalization during early 2023.
• Firmer US data may not guarantee bear’s return, especially after the US CPI-induced play.

EUR/USD eyes weekly gain around 0.9800, especially after Thursday’s tragic rebound from the fortnight low, as traders await the key US consumer-centric data on Friday.

The major currency pair posted the biggest daily gains in over a week the previous day despite firmer US inflation data. The same amplifies the market’s anxiety ahead of today’s US Retail Sales for September and the preliminary readings of the Michigan Consumer Sentiment Index (CSI) and the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations for October. Even so, the EUR/USD buyers cheer the ongoing talks of the European Central Bank’s (ECB) quantitative tightening (QT), as well as softer US Treasury yields.

European Central Bank policymakers discussed earlier this month a detailed timeline for running down a 3.3 trillion euro bond portfolio and envisioned the start of quantitative tightening sometime in the second quarter of 2023, sources told Reuters. It should be noted that the hawkish ECBspeak and the tiring attitude of the US dollar bulls, despite firmer US data, are also likely to favor the pair buyers.

On the same line could be the comments from European Union (EU) Economics Affairs Commissioner Paolo Gentiloni. “EU inflation connected to energy prices,” stated the policymaker earlier in the day while also adding that the monetary policy tightening is unavoidable.

On Thursday, a third consecutively softer US Consumer Price Index (CPI) jostled with the 40-year high Core CPI and drowned the US Dollar Index (DXY) despite hawkish Fed bets. Talking about the data, the US CPI rose to 8.2% versus 8.1% market forecasts but eased as compared to the 8.3% prior. The CPI ex Food & Energy, mostly known as the Core CPI, jumped to 6.6% while crossing the 6.5% expectations and 6.3% previous readings.

It’s worth mentioning that the money market wagers are currently pricing in the 75 bps Fed rate hike in full whereas the US benchmark Treasury yields retreat from their recent tops.

Moving on, chatters surrounding the ECB and risk catalysts like covid updates, Russia-Ukraine news and the stimulus announcements, may entertain the intraday EUR/USD traders ahead of the aforementioned consumer-centric US data. It should be noted that the firmer US numbers aren’t guaranteed invitation to the EUR/USD bears as markets are in the “sell the fact” mode.

Technical analysis

Although three-week-old horizontal support puts a floor under the EUR/USD prices near 0.9670-65, the pair buyers need a daily closing beyond the 21-DMA hurdle of 0.9800 to retake control.