The EUR/USD pair is trading between 1.0725 and 1.0730, breaking a four-day downward trend. Traders need to figure out how to react to US Vice President Joe Biden’s hawkish comments in his State of the Union (SOTU) speech, which took place on January 30. The decline in US Treasury bond yields and mixed comments from Federal Reserve (Fed) and European Central Bank (ECB) officials also influence the pair.

In his SOTU speech, President Biden stated that the US is in its strongest position in decades to compete with China or any other country. However, China’s rejection of a request for a phone call between US Defense Secretary Lloyd Austin and Chinese Defense Minister Wei Fenghe continues to fuel geopolitical tensions and boost demand for the US dollar.

On Tuesday, Minneapolis Fed President Neel Kashkari said that the Fed might have to keep interest rates higher for longer. In contrast, Fed Chairman Jerome Powell said he expects 2023 to be a year of significant declines in inflation. Meanwhile, ECB policymaker Francois Villeroy de Galhau said the Eurozone is not far from reaching its peak inflation.

The EUR/USD traders should monitor any potential risk events in a light calendar, as they may provide fresh impulses for the pair.

EUR/USD Technical Outlook

The EUR/USD pair experienced a sharp drop yesterday, approaching the target at 1.0635, but then it rebounded and attempted to reach 1.0745 again. Currently, it remains stable below this level, supporting the continuation of the bearish trend in the short term. A move beyond 1.0635 could result in a further decline to 1.0515.
However, breaking above 1.0745 would signal a reversal of the bearish trend and a potential return to the main bullish trend.

The estimated trading range for today is between 1.0640 as support and 1.0800 as resistance.

The expected trend for the day is bearish