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EUR/USD weakens toward 0.9800 as hawkish Fed bets pressure DXY bears as EU/German ZEW data is watched
EUR/USD struggles to extend Monday's gains and oscillates near the weekly high. Comments from US Treasury Secretary Yellen, inflation forecasts probe the pair buyers. ECB hawks struggle with the bears amid risk-on atmosphere but recession fears keep buyers away. The October EU/Germany ZEW Sentiment numbers will provide immediate direction, but risk catalysts are more crucial.
During Tuesday's Asian session, the EUR/USD is treading water near the eight-day high, having lately retreated to 0.9840, as buyers seek additional signs to prolong the previous day's rally. Consequently, today's European and German ZEW statistics for October will be crucial for providing fresh impetus amid a slack economic schedule elsewhere.
The main currency pair’s latest inaction could be attributed to a mixed play between the risk-on mindset and the aggressive Fed talk. A light schedule in the United States is also problematic for EUR/USD traders.
Germany's rejection of recession fears and aggressive statements from European Central Bank (ECB) policymakers are favorable for pair buyers. Additionally, the broad US dollar weakening due to the fading fears of the UK’s market collapse also fuels the EUR/USD values. In addition, disappointing US data bolsters the positive momentum. Consequently, the New York Empire State Manufacturing Index for October fell -9.5 vs -4.0 anticipated and -1.5 previously.
In contrast, hawkish Fed wagers and fears of market intervention in Japan and China appear to challenge EUR/USD purchasers. That said, CME’s FedWatch Tool predicts a roughly 95% chance of a 75 bps Fed rate hike in November. In doing so, the tool may have taken cues from the optimistic remarks of US Treasury Secretary Janet Yellen, which indicated a robust US labor market, as well as the optimistic US inflation expectations as indicated by the 10-year and 5-year breakeven inflation rates according to the St. Louis Federal Reserve (FRED) data.
It should be emphasized that China's zero-covid policy, the postponement of significant data/events, and its desire to defend its ability to take control in Hong Kong and Taiwan all pose obstacles to the pair's upward momentum.
In the midst of these trades, S&P 500 Futures track Wall Street's gains, but US 10-year Treasury yields retreat to 3.99%, which has recently tested the US Dollar Index (DXY) bears.
In October, Germany's ZEW data are expected to be weaker than the Eurozone's sentiment index, which may spook EUR/USD traders and provide opportunities for intraday sells. However, substantial emphasis will be devoted to the risk triggers for obvious directions.
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