- Analytics
- News and Tools
- Market News
- Euro regains the smile and retargets the 1.0900 hurdle
Euro regains the smile and retargets the 1.0900 hurdle
- Euro so far reverses part of the recent weakness vs. the US Dollar.
- Stocks in Europe starts the week in a strong fashion.
- EUR/USD bounces of multi-week lows near 1.0840 (August 18).
- The USD Index (DXY) comes under pressure and revisits 103.30.
- Producer Prices in Germany surprised to the downside in July.
- The US docket is empty at the beginning of the week.
The Euro (EUR) leaves behind part of the multi-day decline against the US Dollar (USD) on Monday and motivates EUR/USD to shift its focus to the immediate key barrier at 1.0900 the figure.
In the meantime, the Greenback extends the corrective knee-jerk after hitting new peaks for the month of August near 103.70 last Friday and relegates the USD Index (DXY) to the 103.30 region despite the move higher in US yields early in the European trading hours.
Looking at the broader context of monetary policy, the discussion around the Federal Reserve's stance of maintaining a tighter policy for an extended period seems to have been revived. This is in response to the resilience displayed by the US economy, despite some easing in the labour market and lower inflation readings in recent months.
Within the European Central Bank's realm (ECB), internal disagreements among its Council members regarding the continuation of tightening measures after the summer period are causing renewed weakness that is impacting the Euro negatively.
Moving forward, markets are expected to maintain a cautious approach in light of the Jackson Hole Symposium and Chief Jerome Powell’s speech in the second half of the week.
On another front, speculative net longs in the EUR climbed to two-week highs in the week ended August 15, according to the latest CFTC report.
Data-wise, in Germany, Producer Prices contracted at a monthly 1.1% in July and 6.0% over the last twelve months. The period under scrutiny saw EUR/USD come under heavy pressure amidst the multi-week rally in the Greenback helped by stronger-than-expected results in the US docket.
Daily digest market movers: Euro generates some upside traction near 1.0900
- The EUR picks up pace vs. USD and approaches 1.0900.
- The PBoC reduced by 10 bps the 1-Year Loan Prime Rate to 3.45%.
- Investors will closely follow the developments from the Jackson Hole event.
- US 10-year/30-year yields resume the uptrend to multi-year highs.
- Fed’s tighter-for-longer narrative remains well in place.
- The Fed is likely to maintain rates at current levels until Q1 2024.
Technical Analysis: Euro risks further decline near term
EUR/USD manages to stage a decent rebound with the immediate target at the 1.0900 barrier at the beginning of a new trading week. Despite the current bounce, the pair is still seen under pressure.
In case of further losses, EUR/USD could retest the August low of 1.0844 (August 18) ahead of the July low of 1.0833 (July 6). The breakdown of the latter exposes the significant 200-day SMA at 1.0792 ahead of the May low of 1.0635 (May 31). Deeper down, there are additional support levels at the March low of 1.0516 (March 15) and the 2023 low at 1.0481 (January 6).
Occasional bullish attempts, in the meantime, are expected to meet initial hurdle at the August high at 1.1064 (August 10) prior to the weekly top at 1.1149 (July 27). If the pair clears the latter, it could alleviate some of the downward pressure and potentially visit the 2023 peak of 1.1275 (July 18). Once this region is surpassed, significant resistance levels become less prominent until the 2022 high at 1.1495 (February 10), which is closely followed by the round level of 1.1500.
Furthermore, the positive outlook for EUR/USD remains valid as long as it remains above the important 200-day SMA.
Euro FAQs
What is the Euro?
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
What is the ECB and how does it impact the Euro?
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
How does inflation data impact the value of the Euro?
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
How does economic data influence the value of the Euro?
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
How does the Trade Balance impact the Euro?
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
© 2000-2024. All rights reserved.
This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.
Bank transfers
