Euro looks weaker and breaks below 1.0900 ahead of Powell, key data

• Euro extends the weekly downtick to multi-day lows.
• Stocks in Europe closed Wednesday’s session in a firm note.
• EUR/USD drops below the 1.0900 barrier on extra USD gains.
• Flash inflation figures in Germany are due later in the session.
• Chief Powell meets Bank of Spain’s Hernandez de Cos.

Further selling pressure hurts the Euro (EUR) and forces EUR/USD to break below the key support at 1.0900 the figure ahead of the opening bell in the euro area on Thursday.

Indeed, the pair gives away further ground on the back of the prevailing risk-off scenario and the persistent move higher in the greenback, which motivates the USD Index (DXY) to advance to 2-week highs further north of the 103.00 hurdle on Thursday.

In the meantime, extra gains in the US Dollar underpin the continuation of the corrective decline in EUR/USD, which seems to have met some initial support in the 1.0880 region for the time being, an area also coincident with the transitory 55-day SMA.

The renewed weakness in the risk complex comes after central bank chiefs expressed hawkish sentiments at the ECB's symposium in Portugal on Wednesday, highlighting that current policy measures are still not adequately restrictive. Despite this, the market appears to be at ease with the belief that the Federal Reserve will implement two additional interest rate hikes, potentially back-to-back, signaling the nearing conclusion of the tightening cycle.

Likewise, although the ECB holds a hawkish stance and plans to raise rates in July, and potentially once more thereafter, concerns arise due to the economic decline and credit data, which restrict expectations regarding the extent and duration of the ECB's policy rate increases.

The potential future actions of the Fed and the ECB in normalizing their monetary policies remain a topic of ongoing debate. This discussion takes place against the backdrop of increasing speculation about an economic slowdown on both sides of the Atlantic.

It will be a busy day in terms of data releases, as advanced inflation figures are due in Spain and Germany, as well as the Economic Sentiment and the final print of the Consumer Confidence in the broader euro area.

In the US, the final prints of the Q1 Growth Rate will be in the limelight seconded by usual Initial Jobless Claims, Pending Home Sales and the speech by Atlanta Fed Raphael Bostic (2024 voter, hawk).

Daily digest market movers: Euro appears offered below 1.0900

• The EUR remains under pressure on USD-buying.
• Germany’s flash CPI for the month of June takes centre stage.
• The European Council meets in Brussels later in the morning.
• Fed’s Powell will participate in an event at the Bank of Spain.
• The Dollar looks bid following Wednesday’s event at the ECB Forum.
• ECB’s Mario Centeno (dove) suggested a pause should be close.

Technical Analysis: Euro challenges the 55-day SMA

EUR/USD remains under pressure and puts the provisional 55-day SMA at 1.0880 to the test on Thursday. The loss of this level exposes a deeper pullback to the June low at 1.0844 (June 23) ahead of the provisional 100-day SMA at 1.0815. South from here emerges the May low of 1.0635 (May 31) prior to the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).

If bulls regains the upper hand, the next hurdle is then expected at the June peak of 1.1012 (June 22) prior to the 2023 high of 1.1095 (April 26), which is closely followed by the round level of 1.1100. North from here emerges the weekly top of 1.1184 (March 31, 2022), which is supported by the 200-week SMA at 1.1181, just before another round level at 1.1200.

The constructive view of EUR/USD appears unchanged as long as the pair trades above the crucial 200-day SMA, today at 1.0583.