EUR/USD: Bears struggle above 1.1800, FOMC Minutes eyed

• EUR/USD stays heavy for third consecutive day, defensive of late.
• US dollar bulls battle multi-day low Treasury yields ahead of FOMC minutes.
• Downbeat US data, covid-led challenges to economic recovery weigh on market sentiment.
• EU’s quarterly economic forecasts also become the key before the special ECB meeting.

EUR/USD bears are at a test above 1.1800, down 0.03% around 1.1820, heading into Wednesday’s European session. Even so, the major currency pair prints a three-day downtrend as risk appetite sours and put a safe-haven bid under the US dollar ahead of the key Federal Open Market Committee (FOMC) Meeting Minutes.

Global market sentiment remains downbeat US traders’ return seek fresh clues to justify the hawkish Fed tilt amid mixed data. Recently, US ISM Services PMI slipped to 60.1, below 63.5 forecast and 64.0 prior, in June. On Friday, the employment details tame hopes of Fed’s rate hike and tapering as the headline Nonfarm Payrolls (NFP) jumped to a 10-month high but Unemployment Rate also inched up.

On the other hand, Eurozone Retail Sales rose past 8.3 forecast to 9.0% YoY in May while German ZEW Survey data also improved for June. However, Germany’s Factory Orders shrank in May, by -3.7% MoM versus 5% expected and +1.2% previous readouts.

Other than the macro-backed confusion, the coronavirus (COVID-19) resurgence in the Asia-Pacific region and the outbreak of various variants, which do resist vaccines, also heavy the mood. Recent chatters highlight Epsilon and Lambda as the key challenges to the economic unlock in the West.

Above all, the market’s cautious sentiment ahead of the week’s key events, namely the FOMC Minutes and a special meeting of the European Central Bank (ECB) seems to probe risk appetite, as well as EUR/USD traders, by the press time.

Read: What yield drop ahead of Fed minutes means for dollar

That said, S&P 500 Futures remain mildly offered but the US 10-year Treasury yields refresh the lowest level since late February by the press time. It’s worth noting that Reuters recently said, “The yield spread between Chinese and U.S. sovereign bonds was quoted at its widest since March 3 on Wednesday.”

Today’s FOMC Minutes will be looked for the details over the policymakers’ agreement on the need for the monetary policy tightening. Should there be a large divide, which is expected, the EUR/USD can keep the south-run to brace for tomorrow’s ECB.

Read: ECB Special Meeting Preview: Three potential EUR/USD movers to watch

Technical analysis

The currency major took a U-turn from a short-term falling trend line the previous day to recall the bears. The downward trajectory also took clues from bearish MACD, suggesting further weakness towards a descending support line from May 05, around 1.1790-85. However, the 1.1800 threshold may offer an intermediate halt. Meanwhile, an upside break of the stated resistance line, around 1.1890, will precede 1.1900 and a horizontal hurdle since early March near 1.1990–2000 to challenge EUR/USD bulls.