EUR/USD bears dominate at multi-day low below 1.0800 ahead of ECB Bulletin, Fed Chair Powell’s speech

• EUR/USD licks its wounds after falling to nearly two-month low, marking the biggest slump in three weeks.
• US Dollar cheers upbeat data, hawkish Fed bets and strong yields to please bulls.
• ECB’s de Guindos appear less impressive as a hawk and fails to lift Euro amid absence of major data/events.
• ECB’s Monthly Economic Bulletin, speech from Fed’s Powell and US debt ceiling drama eyed for clear directions.

EUR/USD holds lower grounds near 1.0770 as bears take a breather at the lowest levels in nearly eight weeks amid early Friday morning in Asia, after falling the most since late April the previous day. In doing so, the Euro pair portrays the market’s cautious mood ahead of this week’s key event, namely Fed Chairman Jerome Powell’s speech. Also proding the Euro bears is the anxiety ahead of the US President Joe Biden’s promised announcement on Sunday to avoid the default, as well as concerns about the European Central Bank (ECB) Bulletin.

The major currency pair dropped the most in three weeks the previous day as the US Dollar jumped to a two-month high while tracing upbeat Treasury bond yields amid hawkish Fed bets and favorable data at home. Adding strength to the greenback could be the hopes that the US policymakers will be able extend the debt ceiling after the latest positive comments from them.

With this, the US Dollar Index (DXY) jumped to the highest levels since March 20 while the US 10-year and two-year bond coupons jumped to the March 15 tops. That said, Wall Street closed on the positive side amid cautious optimism in the market.

On Thursday, US Initial Jobless Claims for the week ended on May 12 dropped to 242K versus 254K expected and 264K prior whereas the Philadelphia Fed Manufacturing Survey gauge for May improved to -10.4 from -31.3 prior, versus -19.8 market forecasts. Further, US Existing Home Sales for April eased to 4.28M versus analysts’ estimations of 4.3M and 4.44M prior. Additionally, the US Conference Board Leading Index matches -0.6% market forecasts to print the 13th consecutive decline, indicating a worsening economic outlook, versus -1.5% prior. It’s worth noting that the US Retail Sales and Industrial Production for April printed upbeat figures earlier in the week and inspired the Fed hawks to defend their “higher for longer rates” bias, which in turn allowed the US Dollar to regain its power.

Following the data, Dallas Federal Reserve President Lorie Logan said on Thursday, as reported by CNBC, that data at this time does not support skipping an interest rate hike at the next meeting in June. On the same line, Fed Governor Philip Jefferson said on Thursday that inflation remains too high whereas St Louis Fed President James Bullard reiterated his support for higher rates.

On the other hand, European Central Bank (ECB) Vice President Luis de Guindos delivered a speech while saying, “Inflation in services is the most worrying for the ECB.” The policymaker also added that there is still scope to keep raising rates.

Looking ahead, the Euro bears are likely to keep the reins but their further dominance hinges on the European Central Bank’s (ECB) Monthly Economic Bulletin. More importantly, Fed Chairman Jerome Powell’s speech and US debt ceiling negotiations will be the key as US President Joe Biden said to have a decision to avoid a default by Sunday.

Technical analysis

A daily closing below the 100-DMA, around 1.0810 by the press time, directs EUR/USD toward the mid-March swing high of near 1.0760 while nearly oversold RSI (14) line may prod bears afterward.