EUR/USD pares the first monthly gain in five above 0.9900 ahead of the key EU/US data, Fed

• EUR/USD takes offers to renew intraday low, pauses two-week uptrend.
• Fears of Eurozone recession, geopolitical concerns join ECB’s dovish hike to weigh on EUR.
• USD bulls cheer hawkish Fed bets, firmer US data even as yields challenge the upside momentum.
• Eurozone GDP, inflation can entertain traders but FOMC, US NFP will be crucial for clear directions.

EUR/USD begins the key week on a negative note, declining to 0.9940 during the early hours of Monday’s Asian session, as traders rush to the US dollar for risk safety ahead of crucial data/events. Also exerting downside pressure on the major currency pair could be the latest comments from the European Central Bank (ECB) official, as well as the market’s bets on the US Federal Reserve’s (Fed) next move.

During the weekend, European Central Bank (ECB) policymaker Klaas Knot said that a 75bps increase is feasible in December but has not yet been decided. “A recession is growing becoming likely,” adds ECB’s Knot. On the other hand, Goldman Sachs raises Fed rates outlook and sees peak at 5% in march. Additionally, Russia’s halt to the grain deal citing attacks on its ships from Odessa joins the ongoing US-China tension to add strength to the bearish bias.  

On Friday, Annual inflation in Germany, as measured by the Consumer Price Index (CPI), climbed to 10.4% in October from 10% in September, Germany's Destatis reported on Friday. This reading came in higher than the market expectation of 10.1%. Meanwhile, the Harmonised Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred gauge of inflation, jumped to 11.6% from 10.9%, compared to analysts' estimate of 10.9%.

On the other hand, the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditures (PCE) Price Index rose to 5.1% YoY for September versus 5.2% expected and 4.9% prior.

It should be noted that ECB’s indirect signals of a slowdown in the further rate hikes and a fifth consecutive fall in the US private consumption challenges the EUR/USD traders.

Amid these plays, the yields are down and the equities are bracing for a good month, which in turn teases the first monthly gain of the EUR/USD pair in five ahead of the first readings of the Eurozone Q3 GDP and the inflation data for October, expected 0.2% QoQ and 1.2% MoM respectively versus 0.8% and 1.0% priors in that order. Should the actual data ease the quote could witness further downside amid hawkish bias for this week’s Fed and upbeat US jobs report for October.

Technical analysis

EUR/USD sellers need validation from a downward sloping previous resistance line from June, around 0.9900 by the press time, to retake control.