EUR/USD retreats toward 1.0750 as markets reassess Fed, ECB bets after a blow

• EUR/USD clings to mild losses while paring the biggest daily jump in 11 weeks.
• IMF urges Fed to keep fighting inflation, German FinMin flags deadlock on EU fiscal rules reform.
• Risk appetite remains dicey ahead of next week’s US Inflation, Fed and ECB.
• Sluggish markets may allow Euro buyers to take a breather but bear’s return appears doubtful.

EUR/USD remains sidelined near 1.0780-75 as it consolidates the biggest daily jump since March heading into Friday’s European session. In doing so, the Euro pair portrays the market’s sluggish momentum amid a light calendar and positioning for the next week’s top-tier data/events. Additionally, trader’s recheck of the previous concerns about the European Central Bank (ECB) and the Federal Reserve (Fed) concerns also prod major currency pair buyers of late.

The previous day’s downbeat US Initial Jobless Claims, the highest since October 2021, pushed back the Fed hawks and drowned the US Dollar. Even so, the International Monetary Fund (IMF) urged the US Federal Reserve and other global central banks to "stay the course" on monetary policy and remain vigilant in combating inflation, per Reuters.

On the other hand, Euro traders recollect the bad memories of this week’s growth numbers from Germany and the Eurozone as the Financial Times (FT) quotes German Finance Minister (FinMin) Christian Lindner to suggest more pain for the “Old Continent”. “Germany’s finance minister has warned that EU states are failing to bridge their differences in contentious talks over reform of the bloc’s fiscal rules, denting hopes of a deal by the end of the year,” reports the FT.

It should be observed that the latest comments from ECB policymaker Francois Villeroy de Galhau also weigh on the EUR/USD price as he said, “There is really a slowdown in inflation.”

Elsewhere, growth fears of broad economic recession, especially amid the latest hawkish surprises from the central banks of Australia and Canada, also prod the EUR/USD bulls.

While portraying the mood, the S&P500 Futures print mild losses around the highest levels since August 2022, marked the previous day. That said, the benchmark Wall Street index confirmed bull markets on Thursday, by rising around 20.0% from the lows marked in October. Additionally showing the market’s risk-off mood and putting a floor under the US Dollar are the US Treasury bond yields as the benchmark 10-year and two-year Treasury bond yields remain sidelined near 3.73% and 4.52% respectively, after reversing from the highest levels in a fortnight and snapping a two-day winning streak in that order the previous day.

Moving on, a light calendar and cautious mood ahead of the monetary policy meetings of the Fed and ECB, as well as the US inflation, may allow the Euro pair to consolidate the previous day’s heavy gains. That said, major attention should be given to the yields for clear directions.

Technical analysis

EUR/USD’s corrective pullback remains elusive unless the quote stays beyond a three-week-old previous resistance line, around 1.0750 by the press time. That said, the 100-DMA hurdle of near 1.0810 appears limited short-term upside of the Euro. It should be noted, however, that the RSI and MACD also underpin the bullish bias about the major currency pair.