Euro clings to daily gains around the 1.0700 barrier
The Euro (EUR) manages to improve its performance against the US Dollar (USD), motivating EUR/USD to surpass the key barrier at 1.0700 the figure on Tuesday.
The Greenback remains under further selling pressure and puts the key 105.00 support to the test when tracked by the USD Index (DXY), in the context of a marginal uptick in US yields across the curve and prudence prior to the Federal Reserve (Fed) meeting on Wednesday.
In terms of monetary policy, investors are still evaluating the dovish rate hike implemented by the European Central Bank (ECB) last week. Furthermore, they maintain their anticipation of potential interest rate cuts by the Fed taking place at some point in the second quarter of 2024.
In the Euro’s data space, the Current Account surplus in the eurozone shrank to a seasonally adjusted €20.9 billion in July, while final inflation figures for August saw the headline CPI rise 5.2% from a year earlier and 5.3% YoY when it comes to the Core CPI (excluding energy and food costs).
In the US, Bulding Permits expanded at a monthly 6.9% in August (1.543M units) and Housing Starts contracted 11.3% MoM (1.283M units).
Daily digest market movers: Euro appears bid ahead of FOMC
- The EUR regains extra pace against the USD.
- US and German yields edge higher so far on Tuesday.
- Markets widely anticipate the Fed to keep rates unchanged.
- According to RBA Minutes, there was a strong consensus to hold rates.
- Investors continue to price in potential rate cuts by the Fed in H1 2024.
- An impasse in the ECB’s hiking cycle appears to be gathering traction.
- ECB’s Francois Villeroy said the deposit rate could be at 4.0% for as long as needed.
- OECD sees the Chinese economy expanding 5.1% in 2023 (from 5.4%).
Technical Analysis: Euro sees its downside alleviated above 1.0828
EUR/USD appears to be gaining strength and moving towards the 1.0700 level, but it is important for the pair to quickly surpass the 200-day SMA at 1.0828 in order to alleviate some of the recent bearish sentiment.
In the event that the EUR/USD breaks under its September 14 low of 1.0631, there is a possibility that it may revisit the March 15 low of 1.0516 before reaching the 2023 bottom of 1.0481 from January 6.
On the upside, the focus is on the critical 200-day Simple Moving Average (SMA) at 1.0828. If the pair manages to break above this level, it could potentially lead to a bullish momentum. This could result in a test of the provisional 55-day SMA at 1.0919, seconded by the August 30 high of 1.0945. If this scenario unfolds, it may open the way for a rally towards the psychological level of 1.1000 and the August 10 top of 1.1064. Further upside movement could see the pair aiming for the July 27 peak at 1.1149, ahead of the 2023 high at 1.1275 seen on July 18.
However, as long as the EUR/USD remains below the 200-day SMA, there is a possibility that the pair may continue to experience downward pressure.