EUR/USD rebound pokes parity, US/German statistics, Jackson Hole eyed

• EUR/USD picks up bids to consolidate recent losses around 19-year low.
• Hopes of likely neutral comments from Fed’s Powell at Jackson Hole favor US dollar weakness.
• German energy crisis battles China stimulus to tame recession woes.
• German/US GDP, Germany’s IFO Sentiment figures and US Core PCE data to decorate the calendar.

EUR/USD marches towards parity, up 0.20% intraday near 0.9990, as the US dollar fades upside momentum during Thursday’s European session. The major currency pair’s recent run-up could also be attributed to the market’s hopes of dovish central bankers’ speeches during the all-important Jackson Hole Symposium. It should be noted, however, that the energy crisis in Europe appears to challenge the pair bulls ahead of the second-tier data from the US and Germany.

Global markets portray cautious optimism of late as mixed US data joined hopes that the global central bankers would refrain from comments suggesting aggressive rate hikes, mainly due to the looming recession fears. Also likely to have favored the market consensus could be the recently easy PMIs and inflation signals.

Adding strength to the risk-on mood could be the headlines from China as their Cabinet, State Council, outlined a 19-point policy package on Wednesday while announcing economic stimulus measures worth CNY1 trillion ($146 billion) to stimulate growth affected by covid lockdowns and property market crisis, per Bloomberg. Even so, global rating giant Fitch mentioned that the Chinese land market has yet to recover in a sustainable manner. Previously, Reuters came out with the news suggesting that various Chinese state media agencies are coming to the rescue of the local currency, the yuan, after the recent depreciation, justifying that the country’s strong exports should offset a stronger dollar and hawkish Fed rate hikes.

It’s worth noting that the US Dollar Index (DXY) began Wednesday on a firmer footing before retreating towards 108.50 on a lack of too-strong US data. That said, the DXY drops 0.20% to 108.40 at the latest. Among the scheduled data, an improvement in US Durable Goods Orders and mixed housing figures gained major attention.

On the contrary, rallying prices of the Dutch Title Transfer Facility (TTF) natural gas futures portray the energy crisis in Germany, as well as in the bloc, amid recently increased sanctions on Russian oil. On the same line were comments from an influential economist Marcel Fratzscher of the German Institute for Economic Research mentioned, per Reuters, “The economic impact on Germany of Russia's invasion of Ukraine will last years.”

Amid these plays, the US 10-year Treasury yields rose the most in a week the previous day while refreshing a two-month high to around 3.10%. However, mixed concerns seem to have probed the US bond sellers of late. That said, the Wall Street benchmarks printed mild gains, which in turn helped S&P 500 Futures to remain mildly bid at around 4,150 at the latest.

Looking forward, the final readings of Germany’s second quarter (Q2) GDP and the second version of the US Q2 GDP will join the US Q2 Personal Consumption Expenditure (PCE) to decorate the calendar. Also important to watch will be the monthly prints of Germany’s IFO sentiment figures. However, major attention will be given to updates on the German energy crisis and Jackson Hole for fresh impulse.

Technical analysis

EUR/USD bulls struggle to retake control inside an eight-day-old bearish channel, currently between 0.9990 and 0.9920. Even if the quote crosses the 0.9990 hurdle, the 1.0000 psychological magnet and late July’s swing low near 1.0100 could test the upside momentum.