EUR/USD: Steady above 1.2000 following Yellen’s U-turn, Fed’s Kashkari

• EUR/USD struggles to extend corrective pullback from two-week low.
• US Treasury Secretary Janet Yellen reverses initial rate hike signals, Fed’s Kashkari marks inflation as the key catalyst.
• Bears catch a breather amid off in China, Japan and no major updates on risk catalysts.

EUR/USD seesaws around 1.2015, after refreshing a two-week low the previous day, while portraying indecisiveness during Wednesday’s Asian session. While the risk-off mood dragged the major currency pair south the previous day, a lack of important macros and cautious sentiment ahead of the crucial US data, not to forget holidays in Japan and China, seems to restrict the latest moves.

Also challenging the momentum traders could be the mixed signals from US Treasury Secretary Yellen and Fed’s Kashkari. Yellen took a U-turn from her rate hike support in the latest comments whereas Federal Reserve Bank of Minneapolis President Neel Kashkari highlighted inflation as the crucial figure to back the Fed’s future moves. In doing so, the Fed policymaker also signaled that the US central bank has powerful tools.

It’s worth mentioning that Yellen’s initial comments favoring the rate hike joined the coronavirus (COVID-19) woes in Asia as well as downbeat US data to back the previous day’s risk aversion. The same put a bid under the US dollar index (DXY) but weighed down the equities and US Treasury yields.

Given the lack of clarity, EUR/USD traders may wait for European session open for fresh clues when second readings of German and Eurozone PMIs can provide intermediate direction ahead of the US ADP Employment Change and ISM Services PMI for April.

Read: US ISM Services PMI April Preview: Inflation readings remain key as recovery gains strength

It should, however, be noted that the mixed updates over the pandemic raise doubts on the global economic recovery even as the vaccine developments are positive. Hence, the US dollar could keep the recent gains unless the market turns optimistic, which is less likely ahead of Friday’s US monthly jobs report.

Technical analysis

Unless breaking 1.19955-90 area, comprising late April low and early March highs, EUR/USD bears may not risk entries. Meanwhile, 100-day SMA guards immediate upside around 1.2050.