Euro attempts a rebound beyond 1.0700 amidst Dollar weakness

• The Euro bounces off lows in the sub-1.0700 area vs. the US Dollar.
• Stocks in Europe open Friday’s session with broad-based advances.
• EUR/USD meets initial contention around 1.0685 so far.
• The USD Index (DXY) sheds some ground following multi-month tops.
• Final CPI in Germany matched the preliminary readings in August.
• Wholesale Inventories, Consumer Credit Change come next in the US docket.

The Euro (EUR) manages to gather some upside traction vs. the US Dollar (USD) at the end of the week, lifting EUR/USD back above 1.0700 the figure at the end of the week.

In the meantime, the Greenback partially retreats from Thursday’s six-month tops north of the 105.00 hurdle when gauged by the USD Index (DXY) amidst some tepid recovery in the appetite for the risk complex.

Back to the monetary policy front, speculation over a potential hike by the Federal Reserve (Fed) in November appears to have lost some momentum as of late, while market participants continue to price in rate cuts at some point in Q2 2024.

Regarding the European Central Bank (ECB), market chatter appears to favour a pause at the September 14 meeting, amidst a so far pretty divided Council.

In the euro docket, final inflation figures in Germany saw the CPI rise at a monthly 0.3% in August and 6.1% over the last twelve months, while Industrial Production in France expanded by 0.8% MoM in July.

Across the pond, Wholesale Inventories and Consumer Credit Change are also due.

Daily digest market movers: Euro regains the smile near 1.0700

• The EUR shows some signs of life vs. the USD.
• US yields appear tilted to the downside early on Friday.
• Investors see the ECB keeping the deposit rate unchanged this month.
• Dallas Fed Lorie Logan favours a pause in September.
• NY Fed John Williams expect unemployment to increase past 4%.
• Markets continue to price in Fed rate cuts in Q2 2024.
• Strikes at Chevron LNG plants kick in today.
• Final GDP Growth Rate in Japan came in at 4.8% YoY.

Technical Analysis: Euro keeps favouring a deeper retracement

EUR/USD is trading with modest gains in the vicinity of the 1.0700 area after hitting multi-week lows near 1.0680 in the previous session.

Should the EUR/USD manage to breach the September low at 1.0685 (September 7), it may retest the May low of 1.0635 (May 31) before potentially reaching the March low of 1.0516 (March 15). A breakdown of the latter level could trigger a possible test of the 2023 low at 1.0481 (from January 6).

Conversely, in terms of upward movement, the current focus is on targeting the critical 200-day SMA at 1.0822. Beyond that, bullish momentum may lead to a challenge of the weekly peak at 1.0945 (August 30), which is further bolstered by the provisional 55-day SMA at 1.0945. Subsequently, this could set the stage for a move towards the psychological level of 1.1000 and the August high at 1.1064 (August 10). If the pair manages to clear this area, it might alleviate some of the bearish pressure and potentially aim for the weekly peak at 1.1149 (July 27) ahead of the 2023 top at 1.1275 (July 18).

It's important to note that as long as the EUR/USD remains below the 200-day SMA, a sustained decline in the pair is probable.