EUR/USD licks Fed-led wounds above 0.9800, ECB’s Lagarde, US ISM PMI eyed

• EUR/USD struggles to defend the bounce off an eight-day low.
• Sluggish yields allow DXY bulls to take a breather, hawkish ECBspeak also defends pair buyers.
• Recession woes, Fed’s signals for aggressive rate hikes keep bears hopeful even as ECB’s Lagarde may push back bears.
• US ISM Services PMI could offer extra signals for Friday’s NFP and direct near-term USD moves.

EUR/USD prints mild gains around 0.9825-30 during a sluggish Thursday morning in Europe as bears take a breather following the Fed-inspired volatility. In doing so, the major currency pair rebounds from the lowest level in a week while taking a U-turn from a six-week-old support line.

The latest recovery could be linked to the broad US dollar weakness amid a lack of momentum in the bond market and as traders reassess the Fed’s hawkish message. That said, the US Dollar Index (DXY) retreats from the post-Fed peak of a one-week high to 111.90 whereas the US 10-year and 2-year Treasury yields seesaw around 4.10% and 4.62% by the press time.

It should be noted that the Culture Day holiday in Japan appeared to have restricted the bond market moves due to Tokyo's dominance in Asian Treasury moves.

Additionally, the recent hawkish comments from the ECB policymaker Pablo Hernandez de Cos also favor EUR/USD buyers. In his latest speech, ECB’s de Cos said that ECB "will need additional interest rate increases" to fight off inflation even considering the growing likelihood of a eurozone recession.”

Even so, the recent fears emanating from North Korea and China, as well as the recession woes in the bloc, challenge the EUR/USD traders.

North Korea fired an unidentified ballistic missile toward the East Sea that has since been reported to have flown over Japan, per Reuters. Following the same, Japan warns residents to take shelter in the threat of the North Korean missile. Recently, the US warns Pyongyang over such an effort and raised market fears in Asia. On the other hand, the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing China’s zero-covid policy. Further, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

It’s worth mentioning that the downbeat prints of Eurozone activity numbers for October and a static Unemployment Rate in Germany highlight economic fears for the old continent. Elsewhere, the US Federal Reserve (Fed) also offered a dollar buying opportunity the previous.

Also read: Fed Quick Analysis: Powell pivot? Not so fast, why this looks like a dollar buying opportunity

Amid these plays, the Asia-Pacific equities are down but the S&P 500 Futures print mild gains amid a lackluster session ahead of the European open.

Moving on, EUR/USD traders should pay attention to a speech from ECB President Christine Lagarde for fresh impulse ahead of the US ISM Services PMI, forecasted to ease to 55.5 in October compared to 56.7 in previous readings. While ECB’s Lagarde may help intraday buyers to keep the reins, if she manages to hide recession fears, the US PMI data can help recall the USD buyers despite printing softer outcomes should the details suggest strong employment growth.

Technical analysis

Although an upward-sloping support line from October 13 restricts immediate EUR/USD downside around 0.9810, bulls need to cross the 0.9880 resistance confluence including the 100 and 200 EMAs to retake control.