EUR/USD licks its wounds near 1.0970 after banking woes propelled the biggest daily fall in six weeks

• EUR/USD steadies after the heavy fall as traders await US data.
• Risk aversion supersedes hawkish ECB comments to weigh on Euro pair.
• Fears of banking sector fallouts return as First Republic Bank refrains from earnings guidance.
• US Durable Goods Orders, central bankers’ comments will be important to watch for clear directions.

EUR/USD bears take a breather after witnessing the biggest daily loss in 1.5 months, making rounds to 1.0980-70 during the early hours of Wednesday’s Asian session.

In doing so, the Euro pair seeks fresh clues after the banking fears roiled the market sentiment and fuelled the US Dollar’s demand. With this, the major currency pair even ignored hawkish comments from the European Central Bank (ECB) Officials, as well as mixed US data. It’s worth noting that an update surrounding the major central bank’s Dollar operations also underpinned the US Dollar’s rebound and exerted downside pressure on the quote.

The First Republic Bank’s (FRB) disappointing earnings reports joined the executives’ resistance in taking questions and no earnings guidance to trigger the fresh wave of banking jitters and weighed on the market sentiment the previous day.

Adding strength to the risk aversion were calls that the central bankers are well set for higher rates even as the economics aren’t suitable. Furthermore, the geopolitical concerns surrounding Russia and China also spoil the risk appetite and provide a tailwind to the US Dollar.

In doing so, the EUR/USD ignores hawkish comments from the ECB policymakers. That said, ECB Chief Economist Philip Lane mentioned that the current data suggest we have to raise interest rates again at the upcoming meeting. The policymaker also added, “Beyond May 4 meeting, further rate hikes will depend on data.” Further, ECB Governing Council member and Bank of France head Francois Villeroy de Galhau said that they are likely at the inflation peak today while also adding, “Inflation will probably come down towards 2% at the end of 2024.”

Apart from the ECB talks, the mixed US data also failed to prod the EUR/USD bears. On Tuesday, US Conference Board's Consumer Confidence Index edged lower to 101.3 for April, versus 104.0 prior and  Additional details of the publication stated that the Present Situation Index ticked up to 151.1 during the said month from 148.9 prior whereas the Consumer Expectations Index dropped to 68.1 from 74 previous readings. Further, the one-year consumer inflation expectations eased to 6.2% in April from 6.3% in March. In a different release, the US New Home Sales rose to 0.683M MoM in March versus 0.634 expected and 0.623M revised prior while the S&P/Case-Shiller Home Price Indices and Housing Price Index both rose past market forecast to 0.4% and 0.5% respectively for February.

Amid these plays, Wall Street closed in the red and the US Treasury bond yields were down too, which in turn allowed the US Dollar Index (DXY) to snap a three-day downtrend.

Moving on, US Durable Goods Orders for March will be important to watch as it offers clues for Thursday’s US Gross Domestic Product (GDP) for the first quarter (Q1).

Technical analysis

Despite the latest retreat, EUR/USD bears need validation from a three-week-old ascending support line, around 1.0965 to convince sellers. On the contrary, an upward-sloping resistance line from early February, near 1.1085 at the latest, challenges the Euro pair’s recovery.