EUR/USD hovers around mid-1.0900s as yields retreat, ECB clues, Eurozone Consumer Confidence eyed

• EUR/USD portrays bullish consolidation ahead of key data/events, sidelined of late.
• US Dollar, yields seek fresh clues to extend gains inspired by rate-hike jitters, geopolitical woes.
• Recession woes, cautious ECB talks highlight Eurozone Consumer Confidence for April, ECB clues.
• Risk catalysts, interest rate futures are the key for clear directions.

EUR/USD grinds higher as it consolidates the previous day’s losses around 1.0960 heading into Thursday’s European session. In doing so, the Euro pair cheers the latest retreat of the US Dollar and Treasury bond yields. However, the cautious mood ahead of the key Eurozone data/events challenges the momentum traders, especially amid sluggish markets.

EUR/USD witnessed downside pressure the previous day as the US Dollar cheered hawkish Fed bets and risk-off mood, especially driven by the comments of the Federal Reserve (Fed) officials and fears of the West versus China/Russia tussles. Also, the absence of fresh comments from the European Central Bank (ECB) officials and an unimpressive change to the bloc’s inflation data for March offered an extra burden on the Euro pair.

Among the latest policy hawks from the Fed is New York Fed President John Williams who marked support for a 0.25% interest rate hike in May while saying, “Inflation is still too high, and we will use our monetary policy tools to restore price stability.” Just before him was Chicago Federal Reserve Bank President Austan Goolsbee who highlighted credit market strength as one of the key catalysts to watch ahead of the next Fed monetary policy meeting.

That said, the market players place higher bets on the US central bank’s 0.25% rate hike in May, almost 85% at the latest, as well as reduce the probability of witnessing a rate cut in 2023.

On the other hand, the Eurozone Harmonized Index of Consumer Prices (HICP) confirmed 6.9% YoY figure for March whereas ECB policymaker Isabel Schnabel repeated her previous comments suggesting 'sticky' inflation in the bloc.

Furthermore, the UK’s allegations of China’s hidden motive to crack down on the Western infrastructure and the US House China Committee’s discussion on the Taiwan invasion scenario renew the West versus China tussle story and weigh on the sentiment. On the same line are the fears surrounding the likely drag on the US debt ceiling decision due to US President Joe Biden’s hesitance in lifting debt limits.

Amid these plays, the US Dollar Index (DXY) cheered risk-off mood, before recently making rounds to 102.00. Additionally portraying the sentiment is the S&P 500 Futures that print the first daily loss, so far, in four around 4,168, down 0.25% intraday by the press time. However, the US 10-year and two-year Treasury bond yields grind near 3.60% and 4.25% respectively after refreshing the monthly top the previous day.

Looking forward, the preliminary readings of the Eurozone Consumer Confidence for April and ECB Monetary Policy Meeting Accounts will join ECB President Christine Lagarde’s speech to entertain EUR/USD traders. On the other hand is the US Weekly Initial Jobless Claims, Philadelphia Fed Manufacturing Survey and Existing Home Sales.

Should the scheduled data/events keep highlighting the market’s rate hike fears, mainly tilting towards the Fed, the EUR/USD may return to the bear’s table.

Technical analysis

EUR/USD recovery can’t be confirmed unless witnessing a clear upside break of the 21-SMA on the four-hour chart, near 1.0965 by the press time. That said, an upward-sloping support line from late March, close to 1.0910 is a crucial challenge for the bears to tackle before taking control.