EUR/USD drops below 1.1000 as US Dollar traces firmer yields amid unimpressive Fed bank survey

• EUR/USD takes offers to refresh intraday low, extends the previous day’s losses.
• US Dollar Index picks up bids amid mixed sentiment, upbeat yields.
• Fears of US debt default, hawkish Fed speak supersede indecisive quarterly bank survey outcome to propel US Dollar.
• Risk catalysts eyed amid light calendar ahead of Wednesday’s US CPI.

EUR/USD holds onto the week-start losses as Euro bears prod a 1.1000 round figure, down 0.17% intraday near 1.0990 during early Tuesday. In doing so, the major currency pair takes clues from the market’s mixed sentiment and the US Dollar rebound, as well as recently softer Eurozone data.

That said, the US Dollar Index (DXY) extends the previous day’s rebound amid firmer yields and mixed signals surrounding inflation and banking conditions. The benchmark US 10-year Treasury bond yields rose in the last three consecutive days to 3.51% at the latest whereas the US inflation expectations as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data jumped to a one-week high the previous day.

Elsewhere, the Federal Reserve’s (Fed) quarterly bank loan survey showed tighter standards and weaker demand for commercial and industrial (C&I) loans to large and middle-market firms, as well as small firms, over the first quarter.

Furthermore, unimpressive comments from Chicago Federal Reserve Bank President Austan Goolsbee and US Treasury Secretary Janet Yellen's fears of US default weigh on the EUR/USD price, especially amid recently downbeat EU data.

On Monday, German Industrial Production for March slumped to -3.4% MoM versus -1.0% expected 2.1% prior. Further, the Eurozone Sentix Investor Confidence also deteriorated to -13.1 for May from -8.7 prior and -8.0 market forecasts.

It’s worth noting that European Central Bank chief economist Philip Lane said that there was "a lot of disinflation" coming later this year but added that there was still "a lot of momentum" in inflation. His comments also exert downside pressure on the EUR/USD price amid mildly offered S&P 500 Futures.

Moving on, a light calendar emphasizes the need to look out for risk catalysts while forecasting the EUR/USD moves.

Technical analysis

Given the higher low of the EUR/USD price joining higher RSI (14), the major currency pair is likely to regain upside momentum. The same highlights a three-week-old bullish channel, currently between 1.0960 and 1.1180, as the key challenge for the Euro bears to conquer before taking control.