Euro comes under mild pressure near 1.0750 ahead of US CPI

• The Euro navigates within a narrow range against the US Dollar.
• Stocks in Europe kicked off the session broadly on the defensive.
• EUR/USD’s weekly recovery seems to have been capped around 1.0770.
• The USD Index (DXY) continues to target the 105.00 region.
• EMU Industrial Production comes next on the European docket.
• Investors’ attention will be on the release of US inflation figures.

The Euro (EUR) appears offered against the US Dollar (USD) after Wednesday’s opening bell in the old continent, prompting EUR/USD to trade with slight losses in the mid-1.0700s.

On the USD-side of the equation, the Greenback pays another visit to the 104.70-104.80 band when tracked by the USD Index (DXY), helped by a mild uptick in US yields across different maturities ahead of the publication of key US inflation readings for August.

In terms of monetary policy, the anticipation of a potential interest rate hike by the Federal Reserve (Fed) in November seems to have waned recently, while market participants continue to factor in the likelihood of rate cuts taking place in the second quarter of 2024.

Turning our attention to the European Central Bank (ECB), market discussions seem to lean towards a pause after Thursday's meeting and an additional quarter-point rate raise by year-end, given the current state of a somewhat divided Council.

Looking at the euro docket, Industrial Production readings for the broader eurozone will be the sole release later on Wednesday. Across the ocean, the usual weekly Mortgage Applications measured by MBA and the EIA’s report on crude Oil inventories are also due, apart from the key US CPI prints.

Daily digest market movers: Euro remains prudent ahead of US CPI

• The EUR fades part of the recent advance against the USD.
• US and German yields manage to pick up some upside traction.
• Markets see the ECB keeping the deposit rate unchanged on Thursday.
• UK GDP results missed estimates in July.
• Markets keep adjusting to potential rate cuts by the Fed in Q2 2024.
• Producer Prices in Japan rose more than expected in August.
• The PBoC will promote measures to stimulate demand.

Technical Analysis: Euro risks extra losses while below 200-day SMA

EUR/USD’s weekly recovery seems to have met a decent resistance area around 1.0770.

If EUR/USD manages to break below the September 7 low at 1.0685, it may enter a phase of retesting the May 31 low at 1.0635  before potentially reaching the March 15 low at 1.0516. A breach of the latter level could initiate a possible examination of the 2023 low at 1.0481 seen on January 6.

On the upside, the current focus is on targeting the crucial 200-day Simple Moving Average (SMA) at 1.0826. Beyond that point, a bullish momentum might lead to a challenge of the weekly peak at 1.0945 from August 30, further supported by the provisional 55-day SMA at 1.0935. Subsequently, this scenario could pave the way for an advance towards the psychological level of 1.1000 and the August high at 1.1064 seen on August 10. If the spot clears this area, it could alleviate some of the bearish pressure and potentially aim for July's 27 peak at 1.1149, followed by the 2023 top at 1.1275 from July 18.

As long as the EUR/USD remains below the 200-day SMA, there is a possibility of a sustained decline in the pair.