The Euro experiences some pressure at 1.0750 ahead of the US CPI.

  • The Euro stays in a limited range when compared to the US Dollar.
  • Globally speaking, European stocks began the session mostly lower.
  • The weekly recovery in EUR/USD appears to have peaked at 1.0770.
  • The 105.00 region is still the target of the USD Index (DXY).
  • In the European document, EMU Industrial Production is featured next.
  • Investors will be watching for the publication of US inflation data.

Following Wednesday’s opening bell on the old continent, the Euro (EUR) looked offered versus the US Dollar (USD), causing EUR/USD to trade with minor losses in the mid-1.0700s.

On the USD side of things, the Greenback makes another trip to the 104.70-104.80 range as measured by the USD Index (DXY), supported by a small increase in US rates across a range of maturities before the release of significant US inflation data for August.

In terms of monetary policy, market players continue to factor in the possibility of rate reduction occurring in the second quarter of 2024, while expectations of a possible interest rate hike by the Federal Reserve (Fed) in November appear to have diminished recently.

Moving on to the European Central Bank (ECB), given the current situation of a somewhat divided Council, market discussions appear to trend towards a pause following Thursday’s meeting and an extra quarter-point rate hike by year-end.

According to the euro docket, the only release later on Wednesday will be the Industrial Production figures for the entire eurozone. In addition to the important US CPI prints, the EIA’s report on crude oil stocks and the MBA’s weekly measurement of mortgage applications are also expected on the other side of the globe.

Market movers for the day: The Euro is still cautious ahead of the US CPI

  • During the most recent surge against the USD, the EUR decreased.
  • US and German yields were able to gain some ground.
  • The market expects the ECB to hold onto its unchanged deposit rate on Thursday.
  • July’s UK GDP figures fell short of projections.
  • The markets are still adjusting for the possibility of a Fed rate cut in Q2 2024.
  • In August, producer prices in Japan increased more than anticipated.
  • The PBoC will support initiatives to increase demand.

Technical Analysis: By staying below the 200-day SMA, the euro faces further losses.

The weekly rebound in EUR/USD appears to have encountered a respectable resistance zone above 1.0770.

In the event that the EUR/USD pair breaks below the low of September 7 at 1.0685, it might go through a retesting phase, possibly reaching the low of March 15 at 1.0516, after retesting the low of May 31 at 1.0635. A breach of the latter level may prompt a potential analysis of the January 6, 2023, low at 1.0481.

As far as the upside is concerned, the 200-day Simple Moving Average (SMA), which is located at 1.0826, is the key target. If bullish momentum continues past that point, the weekly peak at 1.0945 on August 30 may be challenged. This level of support comes from the interim 55-day SMA at 1.0935. This might therefore lead to a move up towards the psychological 1.1000 mark and the August high of 1.1064, which was observed on August 10. The spot may aim for the July 27 peaks at 1.1149 and the July 18 2023 top at 1.1275 if it clears this region, which would relieve some of the bearish pressure.

A prolonged drop in the EUR/USD pair is possible as long as it stays below the 200-day SMA.

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