EURUSD bulls struggle around 1.0400 on mixed concerns, Eurozone inflation, Fedspeak eyed

• EURUSD remains sidelined around a 4.5-monnth high, pauses two-day uptrend.
• Market sentiment remains dicey even as geopolitical fears recede.
• Strong US data, Covid woes challenge optimists even as Fed policymakers favor 50 bps rate hike in December.
• Upbeat Eurozone inflation could keep buyers on the table, second-tier US data is also important to watch.

EURUSD steadies near 1.0390-400 as buyers run out of steam during early Thursday, following a two-day uptrend.

The major currency pair’s latest inaction could be linked to the dicey market conditions, as well as mixed comments from the European Central Bank (ECB) and the US Federal Reserve (Fed) policymakers. Adding strength to the EURUSD pair’s inaction could be a cautious mood ahead of the final readings of the Eurozone inflation data for October, expected to confirm the 10.7% initial forecasts per the Harmonized Index of Consumer Prices (HICP) measure.

On Wednesday, the news that Russian-made rockets were fired at Poland and killed two people initially soured sentiment. The same triggered emergency meetings of the North Atlantic Treaty Organization (NATO) and the Group of Seven (G7), which in turn favored the US Dollar (USD) due to its safe-haven appeal. However, the updates shared by the Associated Press (AP) quoted an anonymous US official’s findings while mentioning that the missile may have been fired by Ukraine, which in turn allowed Moscow the criticize Kyiv for the same and worsen the mood.

Elsewhere, US Retail Sales growth rose by 1.3% MoM in October versus 1.0% expected and 0.0% prior. The details suggest that the Retail Sales ex Autos also grew 1.3% MoM compared to 0.4% market consensus and 0.1% previous readings. Further, US Industrial Production contracted by 0.1% in October versus 0.2% forecast and 0.1% prior (revised from 0.4%).

It should be noted that Kansas City Fed President Esther George and Fed Governor Christopher Waller both favored smaller increases in the benchmark rates going forward. However, there was a mismatch in the comments from the ECB policymakers and hence the EURUSD seemed to struggle of late. That said, ECB policymaker Pablo Hernandez de Cos backed further rate increases but Vice President Luis de Guindos teased passive quantitative tightening. Further, ECB Governing Council member Ignazio Visco noted that the case for implementing a less aggressive approach was "gaining ground".

Again this backdrop, Wall Street closed in the red but the US Treasury yields struggle to stage recovery. That said, the S&P 500 Futures print mild losses by the press time, after reversing from the monthly high the previous day.

Moving on, second-tier US data and the risk catalysts are important for near-term directions but major attention will be given to the Eurozone inflation and comments from the central bank policymakers as the EURUSD bulls take a breather.

Technical analysis

Sustained trading beyond six-month-old horizontal support, previous resistance around 1.0370-55, keeps EURUSD buyers hopeful even as the 200-DMA challenges the upside momentum near 1.0420.