EUR/USD prods bears above 1.0900 as ECB hawks gain more acceptance than the Fed ones

• EUR/USD picks up bids to pare recent losses amid market’s consolidation after sluggish calendar and US holiday.
• ECB Officials defend hawkish bias despite unimpressive statistics from the bloc.
• Challenges to sentiment, Fed comments exert downside pressure on Euro price.
• Fed Chair Jerome Powell’s Testimony, PMIs are crucial for immediate directions.

EUR/USD pushes back bears at the highest levels in five weeks, snapping a two-day downturn, as it recovers to 1.0925 amid the early hours of Tuesday’s Asian session. In doing so, the Euro pair justifies hawkish signals from the European Central Bank (ECB) Officials. It’s worth noting that the Federal Reserve (Fed) updates have been suggesting higher rates as well. However, the US central bank’s pause on the rate lift in the last week joined mixed US data to raise doubts about the Fed policymakers’ capacity to lift the rates.

On Monday, European Central Bank (ECB) policymaker Peter Kazimir said, “We need to raise rates again in July.” On the same line, ECB Chief Economist Philip Lane said that another rate hike in July seemed appropriate but noted that the decision in September will depend on incoming data, per Reuters. Furthermore, ECB Governing Council member Isabelle Schnabel also said, “Risks to the inflation outlook are tilted to the upside.” ECB’s Schnabel also cited the need to keep raising interest rates until seeing a convincing evidence that developments in underlying inflation are consistent with a return of headline inflation to 2%.

On the other hand, the Fed monetary policy reports to the US Congress and the latest comments from the Fed officials have been hawkish. That said, the Fed policy report for Congress said, “Inflation in the US is well above target and the labor market remains very tight,” as per Reuters, which in turn put a floor under the US Dollar Index (DXY). Among the Fed talkers, Richmond Fed President Thomas Barkin, Chicago Fed President Austan Goolsbee and Federal Reserve Governor Christopher Waller also appeared a bit hawkish and helped the DXY to reverse from a multi-day low.

Apart from the ECB-Fed play, the market’s fears of easing economic recovery amid higher rates seem to have exerted downside pressure on the EUR/USD price, especially amid upbeat yields in the Eurozone and the UK, as well as downbeat equities. It should be noted that the US Dollar Index (DXY) rose in the last two days after refreshing the lowest level in a month, retreating to 102.45 at the latest.

Furthermore, the US-China tension about Taiwan escalated and the concerns about China’s inability to propel the growth trajectory also roiled the sentiment and the Juneteenth holiday in the US. It’s worth observing that the US National Association of Home Builders (NAHB) survey jumped to 55.0 in June from 50.0 prior, marking the highest level in 11 months and favored the DXY to grind higher, before the latest retreat.

Looking forward, a return of the full markets may entertain the EUR/USD pair traders with the US housing numbers on the calendar to watch. Though, major attention will be given to Fed Chair Jerome Powell’s Testimony and preliminary readings of June’s PMIs for a crystal clear short-term view.

Technical analysis

Overbought RSI (14) joins EUR/USD pair’s failure to cross the 1.0945-50 resistance zone to suggest further downside of the Euro pair towards a two-week-old rising support line, close to 1.0855 by the press time.