EUR/USD dips amid mixed EU data, Powell's hawkish tilt

• EUR/USD seesaws as German Factory Orders jump 8.9%, contrasting with a 1.1% drop in EU Retail Sales.
• Fed's Powell and Kashkari's hawkish comments adjust expectations for US monetary policy, weighing on Euro.
• Interest rate futures show scaled-back Fed rate cut forecasts, with 113 basis points expected.
• Traders eye EU Industrial Production data and Fed speeches.

The Euro losses ground against the US Dollar early during the North American session, following the release of mixed economic data from the Eurozone (EU) and over the weekend hawkish tilt by the Federal Reserve Chair Jerome Powell.  At the time of writing, the EUR/USD exchanges hands at 1.0729, down 0.12%.

EUR/USD meanders near weekly lows as traders trim Fed rate cut estimates, which boosted the USD

Data from the EU before the New York open was mixed as Factory Orders in Germany crushed estimates of 0% and rose by 8.9% MoM due to a jump in aircraft orders. Meanwhile, a European Central Bank (ECB) survey showed that households amongst the block trimmed their inflation expectations for the next 12 months, as the media expect prices to rise by 3.2%, down from 3.5% a month ago.

Although that is positive news, the EUR/USD upside was capped by a worse-than-expected EU’s Retail Sales report, slumping -1.1% in December, below estimates of -1% and November’s 0.3% expansion.

Traders are still digesting a subtle “hawkish” tilt by the US Federal Reserve Chairman Jerome Powell on Sunday after he said, “danger of moving too soon is that the job’s not quite done.” US Treasury bond yield skyrocketed on Monday, while bets for an aggressive easing cycle of the US central bank had subsided.

In the meantime, further Fed officials made some hawkish comments. Minnesota’s Fed President Neil Kashkari stated that monetary policy “may not be as tight as we would have assumed.” Meanwhile, Chicago Fed President Austan Goolsbee said he doesn’t disregard a March rate cut, stressing that good inflation data could pave the way to ease policy.

Interest rate futures linked to the Federal Funds rate (FFR) sees traders expect only 113 basis points (bps) of cuts, lower than the 168 bps expected on January 12. Even though Powell suggested they would ease policy, it would not be close to market expectations.

As of now, US Treasury yields are virtually unchanged while the Greenback, as measured by the US Dollar Index (DXY), clings to minimal gains of 0.05%.

Ahead in the week, the EU’s docket will feature Industrial Production figures on Wednesday. Fed speakers will cross the wires on the US front, led by Loretta Mester, Neil Kashkari, and Susan Collins.

EUR/USD Price Analysis: Technical outlook

The EUR/USD dived and tested the current year-to-date (YTD) low of 1.0723 twice after breaching a key support trendline drawn from October 2023 lows that passed circa 1.0740/60 range.  Another daily close below that level could pave the way to challenging the 1.0700 figure. A further downside is seen at 1.0656 on November 10, followed by the November 1 swing low of 1.0516.

On the bullish side, if buyers regain 1.0760, that could pave the way to reclaiming the 100-day moving average (DMA) at 1.0783. Up next would be 1.0800.