EUR/USD hits fresh weekly low around 1.0800 on broad-based USD strength

• EUR/USD drifts lower for the second straight day amid resurgent USD demand.
• Hawkish Fed expectations and the cautious mood boost the safe-haven buck.
• Reduced bets for more aggressive ECB rate cuts could limit any further losses.

The EUR/USD pair extends the previous day's modest pullback from the 1.0865 region and remains under some selling pressure for the second successive day on Wednesday. The downward trajectory drags spot prices closer to a fresh weekly low, around the 1.0800 mark during the early European session,  driven by a pickup in the US Dollar (USD) demand. Against the backdrop of the Federal Reserve's (Fed) higher-for-longer interest rates narrative, the market nervousness ahead of the crucial US Personal Consumption Expenditure (PCE) Price Index on Thursday appears to be benefiting the safe-haven buck.

Investors this week will also confront a slew of inflation reports from Germany, France and Spain on Thursday, followed by the flash Eurozone CPI print on Friday. In the meantime, the flight to safety triggers a fresh leg down in the US Treasury bond yields and might hold back the USD bulls from placing aggressive bets. Moreover, European Central Bank (ECB) officials have been pushing back against market expectations for a rapid monetary policy easing. This could support the shared currency and limit any meaningful depreciating move for the EUR/USD pair.

Daily digest market movers: Bulls remain on the sidelines despite delayed ECB rate cut bets

• The Federal Reserve's hawkish outlook on interest rates, along with the cautious market mood, boosts the safe-haven US Dollar and drags the EUR/USD pair lower for the second successive day on Wednesday.
• Fed Governor Michelle Bowman said on Tuesday that she was in no rush to cut interest rates and that the slower-than-expected progress on inflation has left policymakers cautious about monetary policy stance. This reaffirms bets that the US central bank will wait until June before cutting rates and tempers investors' appetite for riskier assets ahead of the US Personal Consumption Expenditure Price Index on Thursday.
• Meanwhile, the looming US government shutdown and Tuesday's disappointing release of US Durable Goods Orders do little to influence the USD uptick, though retreating US Treasury bond yields might cap gains.
• US President Joe Biden urged Congress leaders to move quickly and emphasized the necessity of finding a solution to avert a detrimental government shutdown as a legislative logjam showed no signs of abating.
• The US Census Bureau reported that orders for long-lasting US manufactured goods registered a steep fall of 6.1% in January, the most in nearly four years and worse than the 4.5% decline anticipated.
• Separately, the Conference Board's Consumer Sentiment Index fell to 106.7 for February after three straight months of gains amid anxiety over potential recession, despite declining inflation expectations.
• Furthermore, the Richmond Fed's Manufacturing Index recorded the fourth successive month of a negative reading, though it improved to -5 in February as compared to  -15 in the previous month.
• Traders have scaled back their bets for a rapid reduction in borrowing costs by the European Central Bank and now expect less than 100 bps of rate cuts this year, down from around 150 bps at the start of February.
• The market focus remains on the country-level consumer inflation data from Germany, France and Spain, to be published on Thursday. These data will be followed by the Eurozone region-wide flash CPI print on Friday.

Technical analysis: Mixed setup warrants some caution before placing aggressive bearish bets

From a technical perspective, the recent failure ahead of the 1.0900 mark and the subsequent slide below the 200-day Simple Moving Average (SMA) could be seen as a fresh trigger for bearish traders. That said, oscillators on the daily chart are yet to confirm the negative outlook and warrant some caution before positioning for any further losses. Hence, any further downfall is more likely to find decent support near the 1.0785 horizontal zone. The said area should act as a key pivotal point, which if broken decisively could make the EUR/USD pair vulnerable to accelerate the fall back towards retesting sub-1.0700 levels, or a three-month low touched on February 14.

On the flip side, the 1.0850 region seems to act as an immediate resistance, above which the EUR/USD pair could make a fresh attempt to conquer the 1.0900 round figure. Some follow-through buying should pave the way for a further near-term appreciating move towards reclaiming the 1.1000 psychological mark for the first time since January 11.