EUR/USD grinds higher towards 1.0700 as US Dollar traces softer Treasury bond yields

• EUR/USD seesaws around two-week high after rising the most since mid-December.
• Market sentiment improves amid mixed concerns, weighing on the US Dollar.
• US Treasury bond yields benefits from mixed data, hopes of overcoming virus woes, geopolitical fears.
• No major data/events to test buyers but lack of market activity could probe further upside.

EUR/USD treads water around 1.0660, after refreshing a two-week high, as bulls await more clues to end the year 2022 on a positive note.

The major currency pair rose the most in nearly three weeks the previous day amid broad US Dollar weakness, mainly due to the softer US Treasury bond yields and cautious optimism in the markets.

The sentiment could be linked to the mixed data and easing fears surrounding  Covid and the Russia-Ukraine tension, despite recent jitters.

That said, the US 10-year Treasury bond yields marked the first daily loss in five while reversing from the six-week high, down 1.75% to 3.82% by the end of the day. It’s worth noting that Wall Street benchmarks closed with an overall positive performance by rising more than 1.30% each.

Talking about the data, US Initial Jobless Claims rose 225K versus 216K prior for the week ended on December 24 while the Continuing Jobless Claims increased by 1.71M from 1.669M previous readout during the week ended on December 16. However, the 4-week moving average for the same dropped to 221K versus the revised down previous readings of 221.25K.

Around seven major nations have recently announced Covid test requirements for Chinese travelers as the virus cases swirl in the dragon nation but Beijing reverses the “Zero-Covid” policy. Further, China’s Center for Disease Control and Prevention (CDC) top epidemiologist Wu Zunyou warned that Covid is seen spreading throughout the holiday season.

However, Italy’s rejection of fears of any new Covid variant, after finding 50% of flight passengers being infected by the virus, seemed to have helped the markets in ignoring the fears of the virus.  On the same line could be the headlines suggesting China’s discovery of a Covid antiviral pill and hopes of the CDC board to overcome the COVID-19 fears by citing the peak of virus spread in Beijing, Tianjin and Chengdu.

Elsewhere, Moscow unveiled heavy missile fire on Kyiv and Kharkiv but a lack of major victory and Ukraine’s global support, not to forget an absence of heavy losses to lives and infrastructures, seemed to have favored the risk appetite.

Looking forward, a virtual meeting between China President Xi Jinping and Russian counterpart Vladimir Putin could entertain traders while the US Chicago Purchasing Managers’ Index for December, expected 41.2 versus 37.2 prior, will decorate the calendar. Following that, Saturday’s official readings of China Manufacturing and Non-Manufacturing PMIs for the current month will be important to watch for clear directions.

Technical analysis

Although the 21-DMA support of 1.0590 restricts short-term EUR/USD downside, the pair’s advances remain elusive unless crossing the monthly high surrounding 1.0735.