The EUR/USD Remains Defensive Below 1.0700, With The Focus Being On Fed Chair Powell's Speech
On Wednesday, EUR/USD struggles to acquire significant traction despite USD price activity that is subdued. As US bond yields decline and sentiment turns risk-on, the recent USD recovery from a multi-week nadir is capped. Predictions that the ECB will cease raising interest rates appear to devalue the Euro and maintain control over the pair.

Wednesday lacks a clear intraday trend for the EUR/USD pair, which oscillates in a narrow trading band during the Asian session near the round-figure threshold of 1.0700.
The extended rally in US equity markets and the recent steep decline in US Treasury bond yields have not been able to aid the safe-haven US Dollar (USD) in its attempt to profit from this week's modest recovery from its lowest point since September 20. This is consequently regarded as a significant factor providing the EUR/USD pair with a tailwind. In contrast, the USD's decline appears to be mitigated in light of the Federal Reserve's (Fed) uncertain trajectory regarding future rate hikes.
The United States central bank indicated last week that financial conditions might already be sufficiently stringent to contain inflation. Markets interpreted this as evidence that the Federal Reserve had concluded its campaign of policy tightening. Furthermore, the dovish monthly employment report from the United States that was unveiled on Friday reinforced the consensus that the Federal Reserve will sustain the existing system for the third consecutive month in December. Despite this, a number of Fed officials adopted a hawkish posture and praised the economic resilience of the United States.
This, in turn, sustains optimism regarding a potential additional interest rate hike by the Federal Reserve, which is expected to provide some assistance to the US dollar. Additionally, traders may choose to abstain from aggressive directional wagers in anticipation of the speech delivered by Fed Chair Jerome Powell later in the early North American session. Meanwhile, data released on Tuesday, which revealed a more substantial decline in German industrial production in September compared to expectations, could further weaken the Euro and aid in limiting the EUR/USD pair.
This, coupled with anticipations that the European Central Bank (ECB) may abstain from implementing further rate increases, indicates that spot prices have a downward trajectory towards the point of least resistance. In anticipation of Powell's speech, market participants are currently awaiting the publication of the final German CPI and Eurozone Retail Sales figures for motivation. In addition, the USD will be affected by US bond yields and a broader risk sentiment, both of which should generate short-term opportunities in the EUR/USD pair.
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