• EUR/USD is consolidating phase, firm Eurozone data underpins the move.
• Fed Hawkishness and the Merck’s covid pill update boosts the risk- on mood in the market.
• Traders are keen to watch the speech from ECB’s Lagarde and Powell’s Testimony.

Euro is in consolidating phase by erasing losses against greenback in Tuesday Asian session. Upbeat Eurozone data is the rationale behind the move.  However market remain cautious ahead of a speech from the European Central Bank (ECB) President Christine Lagarde and a testimony from US Federal Reserve (Fed) Chairman Jerome Powell.

Eurozone’s investor sentiment showed an unexpected improvement in the first month of 2022 with the reading of 14.9 vs expectation of 11.2, the latest data published by the Sentix research group showed on Monday. Eurozone Unemployment Rate of 7.2% for November versus 7.3% prior also turned favorable for the Euro.

The Fed Powell’s hawkish comment before the testimony due later today and the recent Merck’s pill update favors the market mood. As per a recent news, Mercks’s official says “Merck’s COVID-19 oral pill molnupiravir has a mechanism of action that can work against Omicron and any other variant.”

In his prepared opening remarks, released Monday, The Fed Powell says, “The economy is growing at its fastest rate in years, and the labor market is robust.”

Powell also pledged to prevent high inflation from becoming “entrenched,” but will make no mention of plans for the path of monetary policy. However, he will take questions from senators in his bid for a second four-year term. His pledge on inflation raises question on rate hike and in turn weighs on the market sentiment.

Kansas City Fed President Esther George and St. Louis Fed President James Bullard will also speak later in the day, the first from a group of Fed officials speaking throughout the week.

TD Securities strategists said “It seems that the Fed was of the mindset of “sooner rather than later” for both higher rates and running off its balance sheet after ending bond-buying stimulus.” “An affirmation of March 2022 tightening and early quantitative tightening should support dollar firmness overall, though within well-established ranges.”

EUR/USD 4 Hour Chart:

Support: 1.1286 (S1), 1.1247 (S2), 1.1210 (S3).

Resistance: 1.1361 (R1), 1.1398 (R2), 1.1436 (R3).

Upbeat Eurozone data favors the euro and creates cautious optimism among buyers in the mixed market sentiment ahead of Fed Powell and ECB Largade’s speech. We expect a bullish trend for EUR/USD.