EUR/USD seesaws near 1.0800 as ECB hawks lack acceptance, Lagarde’s speech, US Factory Orders eyed

• EUR/USD fades week-start rebound as full markets return.
• ECB’s Lagarde, Bundesbank President Nagel fail to impress policy hawks despite defending restrictive measures.
• Mixed concerns about Fed’s next moves, market’s cautious optimism also prod the Euro traders.
• ECB President Lagarde’s speech, Eurozone PPI and US Factory Orders will provide fresh impulse.

EUR/USD refreshes intraday low around 1.0790 as it fades the previous day’s rebound from an important support line on the full markets’ return on early Tuesday. That said, the Euro pair’s latest pullback could be linked to the US Dollar’s rebound amid a corrective bounce in the US Treasury bond yields after a long weekend. Also weighing on the major currency pair could be the market’s lack of acceptance of the recent hawkish commentary from European Central Bank (ECB) Officials. Above all, the cautious mood ahead of the key Eurozone and the US data and indecision about the ECB vs. Fed play seems to prod the pair of late.

On Monday, the Eurozone Sentix Investor Confidence Index fell to -21.5 in September from -18.9 in August while the Expectations Index slid to -21.0 points, from -17.3 in the previous month. Furthermore, the Current Situation Index dropped to the lowest level since November 2022, declined to -22.0 points.

Following the data, European Central Bank (ECB) President Christine Lagarde spoke at the Distinguished Speakers Seminar organized by the European Economics & Financial Centre and highlighted the need for central banks to keep the inflation expectations firmly anchored. On the same line, ECB Governing Council member Pierre Wunsch spoke on Saturday, via a radio interview shared by Bloomberg, while stating that he is inclined to say they maybe need to do a little bit more. Additionally, the President of the Deutsche Bundesbank and the ECB Council Member Joachim Nagel advocated for price stability while hesitating from further details the previous day.

On the other hand, Federal Reserve Bank of Cleveland President Loretta J. Mester defended the US central bank’s hawkish move and ruled out the rate cut bias in her speech on Friday. That said, the market’s bets on the Federal Reserve’s (Fed) status quo in September contrasts with a recent improvement in the odds favoring a rate hike during late 2023, which in turn seems to prod the EUR/USD buyers.

It’s worth noting that the pair dropped heavily on Friday after the US Nonfarm Payrolls (NFP) renewed hawkish bias about the Fed, even if the Unemployment Rate and Average Hourly Earnings kept the policy pivot concerns on the table afterward. Following that, the global rating agency Moody’s revised up the US Gross Domestic Product (GDP) predictions for 2023 to 1.9% versus 1.1% expected in May.

Elsewhere, an improvement in the German Bund coupons seems to underpin a recovery of the US Treasury bond yields, which in turn lifts the US Dollar and weighs on the EUR/USD. That said, the benchmark US 10-year Treasury bond yields rose two basis points to 4.20% by the press time. Also, the market’s indecision about China’s ability to defend the economic recovery, as perceived by the S&P 500 Futures’ inaction, seems weighing on the Euro pair of late.

Looking ahead, EUR/USD traders should closely watch ECB President Lagarde’s speech and the Eurozone Producer Price Index (PPI) data for July for immediate directions ahead of the US Factory Orders for the said month.

Technical analysis

EUR/USD struggles to defend the previous day’s U-turn from an ascending support line from March 15, close to 1.0780 by the press time. Even if the quote regains the upside momentum, the 200-DMA hurdle of 1.0820 could test the buyers before giving them control.