Euro looks bid and regains 1.0800 and beyond

• The Euro manages to reclaim 1.0800 vs. the US Dollar.
• Stocks in Europe start the week on a positive note.
• EUR/USD surpasses the 1.0800 hurdle on Dollar weakness.
• The USD Index (DXY) appears offered and near 104.00.
• US yields trade with small losses vs. a marginal uptick in German bunds.
• The Dallas Fed Manufacturing Index is only due on the US docket.

An auspicious start of the week so far sees the Euro (EUR) managing to pick up some upside traction vs. the US Dollar (USD) and motivating EUR/USD to reclaim the area above the key 1.0800 hurdle on Monday, a region coincident with the critical 200-day SMA.

On the other hand, the Greenback gives away part of the recent two-day advance and revisits the 104.00 neighbourhood when measured by the USD Index (DXY) against the backdrop of a tepid recovery in the risk-associated universe and a marginal correction in US yields across the curve.

In the meantime, investors seem to have already digested Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday, where he left plenty of policy optionality on the table and once again reiterated that further rate hikes should not be ruled out.

Concerning monetary policy, there is presently a revitalized discussion surrounding the commitment of the Federal Reserve to uphold a stricter stance for an extended duration. This increased focus arises from the impressive durability of the US economy, despite a slight easing in the job market and decreased inflation statistics witnessed in recent months.

Simultaneously, inside the European Central Bank (ECB), conflicts among its Council members have surfaced pertaining to the potential extension of rigorous measures beyond the summer period. These differences of opinion are giving rise to a renewed sense of vulnerability, which is negatively impacting the Euro.

On the US calendar, the only scheduled release on Monday will be the Dallas Fed Manufacturing Index.

Daily digest market movers: Euro looks to consolidate the breakout of 1.0800

• The EUR challenges the 1.0800 region vs. the USD.
• German 10-year bund yields extend the rebound early on Monday.
• US yields seem tilted to the downside for the time being.
• The markets’ focus now shifts to the US labour market.
• Fed’s tighter-for-longer narrative keeps running in the background.
• Powell’s speech favoured maintaining the tight stance for the time being.
• Investors see the Fed hiking rates by 25 bps in November.

Technical Analysis: Euro does not rule out another visit to 1.0765

The selling pressure around EUR/USD appears to have somewhat eased at the beginning of the new trading week, allowing spot some breathing room around the 1.0800 region.

Further decline could motivate EUR/USD to revisit the August low of 1.0765 (August 25) ahead of the May low of 1.0635 (May 31) and the March low of 1.0516 (March 15). The loss of this level could prompt a test of the 2023 low at 1.0481 (January 6) to re-emerge on the horizon.

Occasional bouts of strength, in the meantime, should meet provisional resistance at the 55-day SMA at 1.0965 prior to the psychological 1.1000 barrier 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, sustained losses are likely in EUR/USD once the 200-day SMA (1.0805) is breached in a convincing fashion.