The EUR/USD pair continues to face resistance below the 1.0700 mark, with subdued USD price action. Despite the risk-on sentiment and declining US bond yields, the recent recovery of the USD from a multi-week low is limited. Forex traders are closely monitoring expectations that the European Central Bank (ECB) has completed its rate hikes, weighing on the Euro and keeping EUR/USD in check. During the Asian session, the pair has been confined to a narrow trading band around the 1.0700 round-figure mark.
The recent pullback in US Treasury bond yields and a sustained rally in US equity markets have failed to boost the safe-haven US Dollar, providing tailwinds for EUR/USD. However, the uncertainty surrounding the Federal Reserve's (Fed) future rate hike path is cushioning the USD's downside. After the Fed's recent statement that financial conditions might already be tight enough to control inflation, the markets speculate that the Fed may halt its policy-tightening campaign. Yet, some Fed officials have taken a hawkish stance, suggesting the possibility of further interest rate increases, adding complexity to the Forex market.
Forex traders are refraining from making aggressive directional bets as they await Federal Reserve Chair Jerome Powell's upcoming speech. Powell's remarks during the early North American session are expected to provide clarity on the Fed's stance and future rate hike plans, potentially impacting the Forex market. The uncertainty surrounding the Fed's decisions remains a pivotal factor influencing EUR/USD and USD performance.
German Industrial Production data, showing a larger-than-expected decline in September, has contributed to undermining the Euro. This, coupled with expectations that additional rate hikes by the ECB may be off the table, indicates a downward trend for spot prices in the Forex market. As Forex market participants await Powell's speech, they look for further cues from the release of the final German Consumer Price Index (CPI) and Eurozone Retail Sales data, both of which can influence EUR/USD.
The Forex market remains in focus as it reacts to various factors, including USD performance, bond yields, and broader risk sentiment. The fluctuating dynamics of these elements present short-term trading opportunities around the EUR/USD pair. Traders are closely observing the levels and trends, as well as the potential impact of Powell's speech, as they navigate the ever-evolving Forex landscape.