Forex News

• EUR/USD remains pressured around five-week low, extends the previous day’s losses.
• Fed policymakers talk down recession, favor aggressive rate hikes.
• German Finance Ministry highlights gloomy economic scenario.
• Yields poke monthly high as traders rush to safe-haven amid recession woes.

EUR/USD holds lower ground near the monthly bottom of 1.0070 as US dollar strength pleases the pair bears amid a sluggish European morning on Friday. That said, fears of German recession and geopolitical concerns join the risk-aversion wave, as well as the hawkish Fedspeak, to weigh on the major currency pair.

That said, the US Dollar Index (DXY) rises to a four-week high of 107.72, up for the third consecutive day, around 107.68 by the press time, amid multiple catalysts ranging from hawkish comments from the Fed policymakers to upbeat data at home, as well as geopolitical fears surrounding China and Europe.

Recently, Bloomberg came out with the news that Chinese President Xi Jinping and Russian President Vladimir Putin plan to attend a Group of 20 Summit to be held in Bali later this year, Indonesian President Joko Widodo said in an interview. The news also mentioned that it was the first time the leader of the world’s fourth-most populous nation confirmed both of them were planning to show up at the November summit. The news adds to the market’s anxiety and fears of more drama, which in turn contributed to the flight to safety and helped the DXY to refresh the monthly high after the release.

Previously, San Francisco Fed President Mary Daly backed either 50 basis points or a 75 basis points hike while signaling the move for the September rate decision whereas Minneapolis Federal Reserve Neel Kashkari mentioned that, per Reuters, he does not believe the county is currently in a recession. Further, the all-time hawk St. Louis Fed President James Bullard said he is leaning towards another 75 bps rate hike in September.

Elsewhere, hopes that Iran nuclear deal with get the much-desired outcome tries to keep the EUR/USD prices in check. Also restricting the EUR/USD downside are comments from Reuters stating that the Eurozone inflation reached a new record high of 8.9% year-on-year in July and a nasty feedback loop is opening up as the current account deficit weighs on the euro and import bills swell for raw materials from gas to metals.

Wall Street closed mixed and exert down pressure on the S&P 500 Futures, down 0.17% intraday at the latest. Further, the US 10-year Treasury yields reverse the previous day’s retreat from the monthly high to 2.891% by the press time.

Germany’s Producer Price Index (PPI) for July, expected 32% YoY versus 32.7% prior, will provide immediate directions to EUR/USD. However, next week’s Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium will be a crucial catalyst for clear directions.

Technical analysis

EUR/USD bears cheer a clear downside break of a three-week-old ascending trend line, around 1.0180 by the press time, to aim for the parity level of 1.0000. However, the RSI conditions challenge the quote’s further weakness past the yearly low of 0.9952.