Euro comes under pressure, revisiting 1.0850 ahead of Jackson Hole
The Euro (EUR) loses part of Wednesday’s shine against the US Dollar (USD), prompting EUR/USD to give away part of the recent gains and retreat to the 1.0850 region in the wake of the opening bell in Europe on Thursday.
On the other side of the road, the Greenback manages to regain some balance following the marked rejection from Wednesday’s multi-week tops near 104.00. The USD Index (DXY) gyrates around the 103.50 area amidst the still absence of a clear direction in US money markets.
Moving forward, all the attention is expected to be on the kick-off of the Jackson Hole Symposium. Investors expect Federal Reserve (Fed) Chairman Jerome Powell’s speech on Friday to be in line with his message after July's FOMC meeting.
Regarding monetary policy, there is a renewed debate surrounding the Fed's dedication to maintaining a more stringent approach over an extended period of time. This heightened attention stems from the remarkable resilience of the US economy, despite slight relaxation in the labour market and lower inflation figures observed in recent months.
Meanwhile, internal divisions among European Central Bank (ECB) Council members have emerged regarding the possibility of prolonging tightening measures beyond the summer season. These disagreements are fueling a renewed perception of fragility, which is hurting the Euro.
A very light economic docket in the eurozone saw French Business Confidence weaken to 96 in August, while the usual Initial Jobless Claims, the Chicago Fed National Activity Index, and Durable Goods Orders for the month of July are all due across the pond.
Daily digest market movers: Euro looks cautious ahead of Jackson Hole
- The Euro weakens a tad against USD near the 1.0850 area.
- The cautious tone ahead of key events favour the US Dollar.
- The downside pressure in US yields appears somewhat exhausted.
- Investors’ focus remains on the Jackson Hole event.
- Fed’s tighter-for-longer narrative keeps running in the background.
- Chair Powell’s speech is likely to reinforce the battle against inflation.
- The Fed is likely to maintain rates unchanged until Q1 2024.
- Iran, Saudi Arabia and UAE to become new members of BRICS in 2024.
Technical Analysis: Euro looks supported by the 200-day SMA
EUR/USD’s downward bias appears propped up by the 1.0800 region, home of recent lows and the critical 200-day SMA.
Further retracements could force EUR/USD to revisit recent lows around 1.0800, an area coincident with the significant 200-day SMA. The loss of this region puts a potential test of the May 31 low of 1.0635 back on the radar ahead of the March 15 low of 1.0516 and the 2023 low at 1.0481 seen on January 6.
In case bulls regain the initiative, the pair is expected to meet an interim barrier at the 55-day SMA at 1.0964 prior to the psychological 1.1000 the figure and the August 10 high at 1.1064. Once the latter is cleared, spot could challenge the weekly top at 1.1149. If the pair surpasses this region, it could alleviate some of the downward pressure and potentially visit the 2023 peak of 1.1275 recorded on July 18. Further up comes the 2022 high at 1.1495, which is closely followed by the round level of 1.1500.
The positive outlook for EUR/USD could be threatened if the spot price breaks below the important 200-day SMA.