Euro regains the smile and revisits 1.0850 ahead of key US data

• The Euro bounces off lows near 1.0830 vs. the US Dollar.
• Stocks in Europe start the session in an upbeat mood.
• EUR/USD rebounds from 1.0830 as risk appetite improves.
• The USD Index (DXY) looks offered in the mid-103.00s.
• US and German yields trade without a clear direction.
• No surprises from the final Manufacturing PMIs in Germany, EMU.
• US Nonfarm Payrolls, ISM manufacturing are next of note.

Following a drop to the 1.0830 region, the Euro (EUR) now manages to regain some balance vs. the US Dollar (USD) and motivates EUR/USD to retake the 1.0850 region at the end of the week.

The so far modest advance in the pair comes in line with the offered stance in the Greenback, while the USD Index (DXY) gyrates around the 103.50 zone amidst the lack of a clear direction in US yields across different maturities.

In the meantime, investors continue to reprice a pause by the Federal Reserve in its tightening campaign, while the upcoming release of the Nonfarm Payrolls for the month of August should lend further insight into this current view.

Back to the European Central Bank (ECB), there is a great deal of uncertainty regarding the potential steps beyond the summer, all amidst a pretty divided Council and rising speculation that a stagflation scenario could be brewing in the region.

Data-wise in the region, final Manufacturing PMIs in Germany and the euro area came in at 39.1 and 43.5, respectively, for the month of August.

Later in the NA session, Nonfarm Payrolls, Unemployment Rate and the ISM Manufacturing PMI will take centre stage, followed by Construction Spending and the final S&P Global Manufacturing PMI.

Daily digest market movers: Euro bounces off three-day lows

• The EUR gathers some fresh oxygen vs. the USD.
• Final PMIs in Europe broadly matched the preliminary prints.
• China’s Caixin Manufacturing PMI returned to expansionary territory.
• PBoC reduced the FX RRR to 4% to support the Chinese yuan.
• Investors’ focus shifts to NFP, ISM Manufacturing.
• Investors now see the Fed on hold for the remainder of the year.

Technical Analysis: Euro could advance further once 1.0950 is cleared

EUR/USD regains some upside traction following Thursday’s strong pullback and three-day lows near 1.0830.  

In case bulls regain the upper hand and EUR/USD surpasses the weekly top of 1.0945 (August 30), the pair is expected to meet the provisional 55-day SMA at 1.0965 prior to the psychological 1.1000 barrier and the August top at 1.1064 (August 10). Once the latter is cleared, spot could challenge the weekly peak 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.

The resumption of the downward bias could motivate the pair to initially test the key 200-day SMA at 1.0815 ahead of the August low of 1.0765 (August 25). The breach of the latter exposes the May low of 1.0635 (May 31) prior to the March low of 1.0516 (March 15) and the 2023 low at 1.0481 (January 6).

Furthermore, sustained losses are likely in EUR/USD once the 200-day SMA is breached in a convincing fashion.