EUR/USD remains depressed below 1.0900, US/EU PMI, ECB’s Lagarde and Fed’s Powell eyed

• EUR/USD stays defensive at the lowest level since early July after declining for five consecutive weeks.
• Mixed EU data, risk aversion joined challenges to Fed policy pivot concerns to weigh on Euro pair.
• Preliminary readings of August PMI data for Eurozone, US will precede Jackson Hole speeches from central bankers to entertain traders.

EUR/USD grinds near 1.0880 as bears take a breather at the lowest levels in six weeks after dominating since late July in a row. That said, the Euro pair’s latest consolidation could be linked to the market’s preparations for this week’s top-tier data/events, especially amid a light calendar on Monday. However, the bearish bias remains intact as the latest EU/US data and market sentiment favors the Greenback.

The upbeat US second-tier manufacturing activity numbers, Retail Sales and wage growth allowed the US Dollar to remain firmer for the fifth consecutive week, especially backed by the hawkish Fed Minutes. Also keeping the Greenback firmer was the risk-off mood and the upbeat Treasury bond yields. With this, US Dollar Index (DXY) grew in the last five consecutive weeks and weighed on the EUR/USD.

On the other hand, the Eurozone Industrial Production and foreign trade numbers marked positive readings for June. That said, the second readings of the Eurozone Gross Domestic Product (GDP) for the second quarter (Q2) confirmed initial forecasts whereas the Employment Change eased for the said period. It’s worth noting that the final figures for July inflation, per the Harmonized Index of Consumer Prices (HICP) measures, also confirmed initial forecasts showing a receding price pressure in the Old Continent.

In addition to the data line that favored the US Dollar, the easing of the dovish bias about the Federal Reserve (Fed), backed by the latest Fed Minutes, also weighed on the EUR/USD price. The latest Fed Minutes showed that most policymakers preferred supporting the battle again the ‘sticky’ inflation, despite being divided on the imminent rate hike.

It’s worth noting that the market players started reassessing previous biases about the major central banks and added strength to the risk aversion, primarily fuelled by the China-linked woes. That said, investors anticipated that the end of the rate hike cycle is still unclear, which means more bearish pressure on riskier assets and a rush for the US Dollar. Furthermore, the Fitch Ratings’ downward revision of the 10 developed economies’ medium-term growth projections also spoiled the mood and allowed the Greenback to remain firmer.

While portraying the mood, Wall Street closed mixed and the US Treasury bond yields retreat after a strongly negative week for the equities and the upbeat bound coupons.

Looking ahead, a light calendar on Monday may allow the EUR/USD pair to consolidate the latest losses. However, cautious mood ahead of the August month Purchasing Managers Indexes (PMIs) will decorate the calendar on Wednesday amid the market’s cautious optimism. More important will be the Kansas Fed’s annual event for central bankers, namely the Jackson Hole Symposium, which will be watched for monetary policy clues.

Technical analysis

Although the nearly oversold RSI (14) line challenges EUR/USD bears, a convergence of the 100-day Exponential Moving Average (EMA) and a downward-sloping trend line from July 18, close to 1.0905–10 by the press time, guards immediate recovery of the Euro pair.