The EURUSD pair eased 0.21% to 1.1816 on Wednesday, September 8. All major pairs landed in the red. The DXY index rose to a two-week high of 92.86, underpinned by strong UST yields and a weakening euro ahead of the ECB's rate decision.
The dollar drew additional support from comments by St. Louis Fed President James Bullard. He told The Financial Times that the central bank should move forward with a plan to trim its massive pandemic stimulus program this year despite a slowdown in job growth last month.
US 10-year Treasury yields remain near highs amid growing concerns over the spread of a new Covid variant and its implications for economic recovery.
The dollar acts as a defensive asset and is drawing support from FOMC members, who have spoken in favor of tapering bond purchases.
Today’s macro schedule (GMT+3)
11:35 RBA Deputy Governor Guy Debelle speech
14:45 ECB interest rate decision; 15:30 ECB press conference
15:30 US: initial weekly jobless claims
18:00 US: EIA weekly petroleum status report
19:00 Canada: BoC Governor Tiff Macklem speech
20:00 US: FOMC member Michelle Bowman speech
21:00 US: FOMC member John Williams speech
Major currencies have been trading lower in Asia, except for the Japanese yen and franc. Risk appetite remains sluggish. The DXY index recovered to 92.72. The market remains jittery, likely due to the upcoming ECB meeting.
Experts suggest that the ECB could decide to taper monthly bond buying to EUR 60 bln from the current EUR 80 bln. They draw this conclusion in view of mounting Eurozone inflation, although the European regulator previously reported that it would continue to purchase assets under the PEPP program at least until the end of March 2022.
In addition to Christine Lagarde, FOMC members Michelle Bowman and John Williams, as well as Bank of Canada Governor Tiff Macklem will deliver speeches today. If Bowman and Williams also talk about QE tapering, the dollar will remain on its upward trajectory.
By the time of writing, the euro was trading at 1.1832. The single currency garnered support around the 1.1800 handle. Price action breached 1.1830 and buyers have pushed slightly higher. The price had been consolidating in the range of 1.1800-1.1830 for several hours.
Traders now await the ECB's policy decision and Lagarde's speech. For this reason, the market activity may remain low-key until the press conference. Technically, the euro is primed for recovery, but whether it will be possible to raise the price in the absence of news is questionable. Given that buyers breached the 1.1830 level, the road to 1.1846 is open for them. If the ECB decides to taper bond purchases, price could spike momentarily to 1.1885.
Bottom line: the euro closed lower on Wednesday. The single currency came under pressure amid lackluster demand for risk assets, with support around 1.1800. All eyes are on on the ECB meeting and Christine Lagarde's press conference. The target is 1.1845 for buyers, and 1.1775 for sellers. Lagarde’s remarks will drive today’s trend.