EUR/USD flirts with weekly low, manages to hold above mid-1.0600s ahead of ECB’s Lagarde

• EUR/USD struggles near the lower end of its weekly range amid a stronger US Dollar.
• Hawkish remarks by Fed officials and a softer risk tone underpin the safe-haven buck.
• The mixed signals about the ECB’s next policy move also act as a headwind for the pair.

The EUR/USD pair remains depressed during the Asian session on Friday and is currently placed near the lower end of its weekly range, just above mid-1.0600s.

The US Dollar (USD) stands tall near a one-week high touched on Thursday in reaction to hawkish remarks by several FOMC members, including Federal Reserve (Fed) Chair Jerome Powell, and turns out to be a key factor weighing on the EUR/USD pair. Fed officials said that they are still not confident whether interest rates are yet high enough to finish the battle with inflation. Meanwhile, Powell, speaking at an International Monetary Fund event, noted that policymakers are encouraged by the slowing pace of inflation but are not sure that the monetary policy is sufficiently restrictive to keep the momentum going.

The comments revived bets for at least one more interest rate hike by the US central bank, which, along with a weak auction of 30-year Treasury bonds, sent yields higher across all maturities and continues to underpin the buck. This comes on top of concerns about the worsening economic conditions in China – the world's second-largest economy – and tempers investors' appetite for riskier assets. The anti-risk flow led to the overnight decline in the US equity markets, which is seen as another factor benefitting the Greenback’s relative safe-haven status and contributing to capping the upside for the EUR/USD pair.

The shared currency, on the other hand, has been struggling to attract any meaningful buyer in the wake of mixed signals about the European Central Bank's (ECB) next policy move. In fact, the current market pricing indicates a 30% chance of a cut in March. That said, Vice President Luis de Guindos said on Thursday that the moment had not yet arrived to start discussing a reduction of ECB interest rates. This might hold back traders from placing any bullish bets around the Euro, suggesting that the path of least resistance for the EUR/USD pair is to the downside and any corrective bounce is likely to get sold into.

There isn't any relevant market-moving economic data due for release from the Eurozone on Friday and hence, the focus will be on ECB President Christine Lagarde's appearance at an event in London. The US economic docket, meanwhile, features the Michigan Consumer Sentiment Index, due for release later during the North American session. Apart from this, the US bond yields and the broader risk sentiment might influence the USD price dynamics, which, in turn, should produce short-term trading opportunities around the EUR/USD pair.

Technical levels to watch