Euro loses the grip and challenges 1.0800

• Euro remains well on the defensive vs. the US Dollar.
• Stocks in Europe maintain the positive streak on Wednesday.
• EUR/USD approaches the key support at 1.0800.
• The USD Index (DXY) advances to new two-month highs near 104.00.
• Flash PMIs in the euro area came in mixed for the current month.
• Housing data, advanced PMIs are due next across the pond.

There is no respite for the selling pressure around the Euro (EUR) against the US Dollar (USD), forcing EUR/USD to trade in new multi-week lows and dispute the key support at 1.0800 the figure on Wednesday.

Further gains in the Greenback now encourage the USD Index (DXY) to trade at shouting distance from the key barrier at 104.00 in a context of further correction in US yields across different maturities following recent peaks.

In terms of monetary policy, there has been renewed discussion regarding the Federal Reserve's commitment to maintaining a more restrictive stance for an extended period of time. This renewed focus is a result of the US economy's resilience, even amidst a slight easing in the labour market and lower inflation readings in recent months.

At the European Central Bank (ECB), internal disagreements among its Council members have surfaced regarding the continuation of tightening measures beyond the summer period. These disagreements are contributing to a renewed sense of weakness that is having a negative impact on the Euro.

Looking ahead, market participants are expected to approach the upcoming Jackson Hole Symposium and Chairman Jerome Powell's speech in the latter part of the week with caution.

In the euro docket, flash PMIs in Germany and the broader euro area showed a small improvement in the manufacturing sector vs. renewed weakness in the services gauges.

On this, money market futures indicate a probability of only 40% for a 25 bps increase in interest rates by the ECB in the upcoming month. This is in contrast to the situation before the data was released, where the probability was approximately 60%.

In the US, advanced PMIs are also due, seconded by the usual weekly Mortgage Applications tracked by MBA and New Home Sales.

Daily digest market movers: Euro keeps the offered stance in place near 1.0800

• The EUR weakens further vs. USD and trades closer to 1.0900.
• The risk-off trade props up the upside bias in the US Dollar.
• US yields seem to have entered an impasse following recent peaks.
• Investors’ focus remains on the Jackson Hole event due later in the week.
• Fed’s tighter-for-longer narrative dominates the mood among traders.
• The Fed is likely to maintain rates unchanged until Q1 2024.

Technical Analysis: Euro could accelerate losses below the 200-day SMA

EUR/USD’s decline gathers extra impulse and gradually approaches the key support at 1.0800, which appears also underpinned by the proximity of the crucial 200-day SMA (1.0797).

Further retracements could force EUR/USD to revisit the significant 200-day SMA at 1.0797 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).

In case bulls regain the initiative, the pair is expected to meet an interim barrier at the 55-day SMA at 109620961 prior to the psychological 1.1000 the figure and the August high at 1.1064 (August 10). Once the latter is cleared, spot could challenge the weekly top at 1.1149 (July 27). If the pair surpasses this region, it could alleviate some of the downward pressure and potentially visit the 2023 peak of 1.1275 (July 18). Further up comes 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 could be threatened is spot breaks below the important 200-day SMA.