EUR/USD struggles for a firm intraday direction, consolidates around 1.0600 mark

• EUR/USD oscillates in a familiar trading range around the 1.0600 mark on Tuesday.
• The BoJ-inspired rally in the JPY weighs on the USD and lends support to the major.
• Hawkish Fed, rising US bond yields and the risk-off mood limits losses for the buck.

The EUR/USD pair struggles to gain any meaningful traction and seesaws between tepid gains/minor losses through the early European session on Tuesday. Spot prices, however, show resilience below the 1.0600 mark and remain at the mercy of the US Dollar price dynamics.

The Bank of Japan-inspired rally in the Japanese Yen is seen weighing on the USD, which, in turn, is seen lending some support to the EUR/USD pair. That said, a combination of factors continues to act as a tailwind for the greenback and keeps a lid on any meaningful upside for the major, at least for the time being.

Investors seem worried that a surge in COVID-19 cases in China could delay a broader reopening. This, in turn, overshadows the optimism over the easing of lockdown measures and takes its toll on the global risk sentiment. This is evident from a weaker tone around the equity markets and should benefit the safe-haven buck.

Apart from this, a more hawkish outlook by the Federal Reserve last week supports prospects for the emergence of some USD dip-buying. In fact, the US central bank indicated that it will continue to raise rates to tame inflation and projected at least an additional 75 bps increase in borrowing costs by the end of 2023.

This, in turn, pushes the US Treasury bond yields higher and reaffirms the near-term positive outlook for the greenback. That said, hawkish signals from the European Central Bank (ECB), signalling that it will need to raise interest rates significantly further to crush inflation, warrant caution for bearish traders.

In the absence of any major market-moving economic releases from the Eurozone, the mixed fundamental backdrop warrants some caution before placing aggressive directional bets. The US economic docket, meanwhile, features housing market data - Building Permits and Housing Starts - later during the early North American session.

This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the EUR/USD pair. The focus, however, will remain on the final US Q3 GDP print on Thursday, followed by the release of the Core PCE Price Index - the Fed's preferred inflation gauge - on Friday.

Technical levels to watch