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EURUSD approaches 200-DMA hurdle amid Poland-inspired jitters ahead of US Retail Sales, ECB’s Lagarde

  • EURUSD picks up bids to reverse recent pullback from four-month high.
  • Mixed concerns over Russia’s involvement in missiles attack on Poland entertained markets of late.
  • Fears of Monetary policy divergence between US Federal Reserve and European Central Bank seem to favor EURUSD bulls.
  • Softer US Retail Sales, hawkish comments from ECB’s Lagarde appear necessary for further upside.

EURUSD regains upside momentum after a dismal start to the key Wednesday, picking up bids to refresh intraday high near 1.0390 by the press time. In doing so, the major currency pair reverses the late Tuesday’s pullback from a four-month high.

Indecision over Russian-made missiles challenges EURUSD bulls

Russian-made missiles killed two people in the European nation bordering Ukraine and amplified geopolitical fears due to its status as a member of the North Atlantic Treaty Organization (NATO). Even if Moscow’s military denies any such attempt, the NATO Ambassadors and the members of the Group of Seven Nations (G7) are up for emergency meetings and raised fears. Recently, United States (US) President Joe Biden mentioned that based on the trajectory, it is unlikely that missiles fired from Russia.

Softer US data highlights ECB versus Fed divergence

On Tuesday, Germany’s ZEW Economic Sentiment Index improved to -36.7 in November versus -59.2 prior and the market expectation of -50. Further, the nation’s ZEW Current Situation Index also rose to -64.5 from -72.2 previous readings and the analysts’ estimate of -68.4.  Additionally, the second estimate of the Euro Area Gross Domestic Product (GDP) for the third quarter (Q3) matched the initial forecasts of 2.1% YoY and 0.2% QoQ. On the other hand, US Producer Price Index (PPI) for October eased to 8.0% YoY versus market forecasts of 8.3% and the downwardly revised prior of 8.4%. It’s worth noting that the monthly figure reprinted the 0.2% prior (revised from 0.4%) while easing below 0.5% expectations. Moreover, the Federal Reserve Bank of New York’s Empire State Manufacturing Index jumped to 4.5 in November from -9.1 in October and the market expectation of -5.

Given the softer data from the United States, the recently mixed concerns over the Fed’s pivot join receding hawkish bets on the US central bank’s next move to weigh on the EURUSD price.

US Retail Sales, ECB’s Lagarde will be important

After witnessing recently downbeat US Consumer-centric data, the EURUSD pair traders will wait for the details of the US Retail Sales for October, expected 1.0% versus 0.0% prior and to be posted Tuesday at 13.30 GMT. Should the number surprise markets with firmer prints, the EURUSD pair may print another pullback from the key moving average.

Alternatively, ECB President Christine Lagarde might welcome the latest positive economics to defend the hawkish plans of the region’s central bank. However, fears of recession loom over the bloc. As a result, any mention of the same could weigh on the EURUSD prices.

Also read: US October Retail Sales Preview: US Dollar unlikely to find reprieve

EURUSD technical analysis

EURUSD price pierces a six-month-old horizontal resistance area surrounding 1.0350 as bulls approach the 200 Daily Moving Average (DMA), close to 1.0425 by the press time.

In doing so, the pair buyers remain cautious amid the overbought conditions of the Relative Strength Index (RSI), located at 14, as well as the recent sluggishness in the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator.

Hence, the EURUSD pair’s upside past 1.0425 appears tough.

Not only the 200-DMA but the recent high of 1.0481 and tops marked during late June and May, respectively around 1.0615 and 1.0785, also challenge the EURUSD bulls.

Alternatively, a horizontal line comprising multiple levels marked since July, around 1.0280, restricts the EURUSD pair’s immediate downside.

Following that, September’s peak and a one-week-old support line, close to 1.0200 and 1.0100 in that order, will be crucial to watch for the bears.

It’s worth noting that the 100-DMA level surrounding 1.0025 appears the last defense of the EURUSD buyers, a break of which won’t hesitate to recall the yearly low on the chart.

EURUSD: Daily chart

Trend: Limited upside expected