EUR/USD ignores dovish shift in Fed bets to approach 1.0860 support amid recession woes

• EUR/USD remains pressured after reversing from two-month high on Tuesday, mildly offered of late.
• Downbeat US data renew recession woes and allowed Euro buyers to take a breather amid mixed EU statistics.
• Geopolitical fears, market’s consolidation amid holiday mood can please intraday EUR/USD bears.
• US Nonfarm Payrolls will be the key to rejecting bullish bias.

EUR/USD holds lower ground near the intraday bottom of 1.0884 as it prints two-day downtrend, after reversing from the highest levels since early February on Tuesday.

That said, the Euro pair’s latest losses could be linked to the US Dollar’s corrective bounce amid recession woes and geopolitical fears. However, downbeat US data and comparatively hawkish bets on the European Central Bank (ECB) than the US Federal Reserve (Fed) seem to put a floor under the EUR/USD prices.

US Dollar Index (DXY) extends the previous day's rebound from a two-month low to 102.00 by the press time, up 0.12% intraday, as it cheers the greenback’s haven appeal amid fears of economic slowdown and geopolitical woes emanating from China and North Korea. While portraying the mood, S&P 500 Futures drop for the third consecutive day even if the benchmark US Treasury bond yields remain sluggish around the multi-day bottom.

Recession woes gain momentum as consecutive weakness in the US employment numbers raised fears of a slowdown in the world’s biggest economy and contagion risk associated with the same. A disappointing 19-month low of the US JOLTS Job Openings for February precedes the ADP Employment Change for March which dropped to 145K from 200K expected and an upwardly revised prior of 261K. On the same line, the final readings of S&P Global Composite and Services PMIs for March also came in downbeat as the former one declined to 52.3 from 53.3 preliminary estimations while the Services PMI dropped to 52.6 from 53.8 anticipated earlier. More importantly, the US ISM Services PMI for the said month amplified pessimism as it dropped to 51.2 versus 54.5 expected and 55.1 prior.

On the other hand, S House of Representatives Speaker Kevin McCarthy’s talks with Taiwanese President Tsai Ing-Wen renewed the Sino-American tussles. On the other hand, North Korea on Thursday accused the U.S. and South Korea of escalating tensions to the brink of nuclear war through their joint military drills, vowing to respond with "offensive action," state media KCNA reported per Reuters.

It should be observed that CME’s FedWatch Tool suggests a nearly 57.0% of chance that the US central bank will pause its rate hike trajectory in May. Alternatively, the ECB’s 0.25% rate hike is almost given. With this in mind, ECB policymaker Boris Vujčić said on Wednesday, “The largest part of the rate-hiking cycle is behind us.” The ECB official also added that “to address core inflation, we might need to raise rates further.”

Talking about the data from the bloc, Germany Factory Orders improved to -5.7% YoY for February from -12.0 revised down prior and -10.5% market forecasts while the MoM growth came in at 4.8% compared to 0.3% expected and 0.5% previous readings. It’s worth noting that Germany’s final readings of S&P GlobalBME Composite PMI for March confirmed 52.6 initial estimations while Services PMI eased to 53.7 versus 53.9 flash forecasts. On a broader front, Eurozone S&P Global Composite PMI eased to 53.7 in March versus 54.1 first readings whereas Services PMI also declined to 55.0 during the stated month from 55.6 preliminary forecasts.

Looking forward, EUR/USD traders will be interested in more clues for Friday’s all-important Nonfarm Payrolls (NFP).

Technical analysis

Overbought RSI joins the EUR/USD pair’s U-turn from a one-year-old resistance line, around 1.0950 at the latest, to please sellers.