EUR/USD aptly portrays pre-Fed anxiety below 1.0800, ECB’s Lagarde eyed too

• EUR/USD grinds near five-week high after four-day winning streak.
• Receding fears of banking crisis backed hawkish ECB talks to favor Euro bulls.
• US Treasury Secretary Yellen manages to restore market sentiment, mixed EU/US data gain little attention.
• How FOMC reacts to banking debacle is the key, 0.25% Fed rate hike is almost given.

EUR/USD dribbles around 1.0760-70 as bulls take a breather at the highest levels in five weeks on the Federal Reserve (Fed) decision day, following a four-day uptrend. In doing so, the Euro pair portrays the market’s cautious mood ahead of the key catalysts, as well as shows traders’ indecision amid the latest rebound in sentiment and the Treasury bond yields, not to forget hawkish central bank bias.

Global markets witnessed a sigh of relief on Tuesday, after witnessing a risk-off mood in the last few days, as the US policymakers’ efforts to tame the banking crisis gained the market’s acceptance.

Among the key developments, US Treasury Secretary Janet Yellen’s comments gained major attention as she said, "Treasury, Fed, FDIC actions reduced risk of further bank failures that would have imposed losses on deposit insurance fund."  Earlier on Tuesday, Bloomberg shared the news stating that the “US officials are studying ways they might temporarily expand Federal Deposit Insurance Corporation (FDIC) coverage to all deposits, a move sought by a coalition of banks arguing that it’s needed to head off a potential financial crisis.”

Not only the US policymakers but ECB policymaker Martins Kazaks and Dr. Marcel Rohner, Switzerland’s Banking Association Chairman also tried to convince the markets that their respective banking system isn’t on the brink of collapse.

Recently, the news that the US policymakers are discussing ways to surpass the US Congress to defend the banks joined chatters that the First Republic Bank eyes government helps to encourage buyers probed EUR/USD traders.

It should be noted that mixed data from Europe and the US also test the pair traders at the start of the key day.

On Tuesday, Germany’s ZEW Economic Sentiment Index dropped to 13.0 for March from 28.1 in February, versus the market expectation of 16.4, while the Current Situation gauge arrived at -46.5 for the said month from -45.1 prior and -45.8 analysts’ estimations. It should be noted that the Eurozone ZEW Economic Sentiment Index slumped to 10.0 for March from 29.7 in previous readings and market forecasts of 23.2. 

On the other hand, the US Existing Home Sales for February marked a notable jump of 14.5% versus 0.0% expected and -0.7% prior. However, the Philadelphia Fed Non-Manufacturing Business Outlook survey gauge dropped to -12.8 in March and tamed the US Dollar-linked optimism afterward.

Elsewhere, S&P 500 Futures remain lackluster despite upbeat Wall Street closing while benchmark US Treasury bond yields struggle to extend a two-day rebound from the lowest levels since September 2022. That said, the US 10-year and two-year Treasury bond yields seesaw around 3.60% and 4.18% respectively by the press time.

Looking ahead, ECB President Christine Lagarde’s comments could entertain EUR/USD traders ahead of the all-important Federal Open Market Committee (FOMC) monetary policy meeting.

It should be noted that the Fed’s 0.25% rate hike is almost given and hence EUR/USD bears should eye for hawkish developments in the dot plot and comments to push back banking turmoil in Fed Chairman Jerome Powell’s speech.

Technical analysis

Although a clear upside break of 50-DMA, around 1.0730, keeps EUR/USD buyers hopeful, a three-week-old resistance line, near 1.0800 at the latest, prods the Euro pair’s further upside.