Ella 
EUR/USD rose for a second straight session on Tuesday and bounced back from last week’s 1.0765 area, the lowest level since June 13. Spot prices in Asia traded around the 1.0835 area, up more than 0.15% on the day, but fundamentals make bulls cautious before betting on further gains.
A further retreat in U.S. bond yields, combined with an overall upbeat risk tone, dragged the safe-haven dollar away from a near three-month top hit last week, boosting EUR/USD. Elsewhere, the euro was boosted by hawkish comments from ECB President Christine Lagarde last Friday, who said interest rates must be kept high for as long as necessary to keep inflation down, which remains high.
Still, expectations that the ECB will sooner or later halt its rate-hike cycle continue to rise, especially after flash purchasing managers’ indices (PMIs) for August showed business activity in the euro zone fell more than expected and revived recession fears . In addition, the Federal Reserve (Fed) is likely to raise interest rates further, which will act as a positive factor for US bond yields and limit the dollar’s losses. Therefore, caution should be exercised before shorting EUR/USD.
It is worth recalling that Federal Reserve Chairman Jerome Powell said in a scheduled speech at the Jackson Hole Symposium on Friday that inflation remains too high and the central bank is prepared to continue raising interest rates to curb persistently high prices. In addition, the resilience of the US economy may force the Fed to stick to its hawkish stance. That expectation pushed the yield on the benchmark 10-year U.S. government bond to its highest level since November 2007 last week, favoring dollar bulls.
Before confirming the short-term bottoming of the euro/dollar and rising further, the above-mentioned fundamental background is worth traders cautiously waiting for strong follow-up buying. Market participants are now looking to U.S. economic data, including the Conference Board consumer confidence index and job vacancies data, to provide a short-term boost during Tuesday’s North American session.
