Euro extends the decline to new six-month lows near 1.0570

• The Euro remains offered vs. the US Dollar.
• Stocks in Europe start the day well on the defensive.
• EUR/USD loses ground and revisits multi-month lows around 1.0570.
• The USD Index (DXY) reaches fresh yearly highs north of 106.00.
• US Consumer Confidence will take centre stage later in the NA session.

The bearish sentiment surrounding the Euro (EUR) gathers further steam against the US Dollar (USD), motivating EUR/USD to slip back to new six-month lows around 1.0570 on Tuesday.

On the other hand, the Greenback advances for the third consecutive session and clinches new 2023 peaks in levels last traded in late November 2022 past the 106.00 barrier when measured by the USD Index (DXY).

The sharp downside in the pair comes amidst the intense rally in US yields across different time frames, while the German 10-year bund yields trade in twelve-year peaks north of 2.80%.

Looking at the macro scenario, the dollar’s sharp upside momentum remains propped up by expectations of the Fed’s tighter-for-longer stance, which was particularly exacerbated at the latest FOMC event on September 20.

In the vicinity of the European Central Bank (ECB), recent Board members found shared agreement following a prior inclination towards a potential prolonged impasse in its hiking cycle, despite the ongoing presence of inflation significantly exceeding the bank's target.

In the US docket, the Conference Board’s Consumer Confidence gauge will be in the limelight, followed by New Home Sales, the FHFA’s House Price Index and the speech by FOMC’s permanent voter, Michelle Bowman (hawk).

Daily digest market movers: Euro remains under heavy pressure

• The EUR extends the decline vs. the USD.
• US and German yields navigate the area of multi-year peaks.
• Markets expect the Fed to hike rates by 25 bps before end of 2023.
• Investors see potential interest rate cuts by the Fed in Q3 2024.
• Talks of a pause by the ECB remain on the rise.
• Intervention fears surround the price action around USD/JPY.

Technical Analysis: Euro risks a drop to 1.0516

The selling pressure around EUR/USD remains everything but abated for yet another session, leaving the door wide open to further retracement in the short-term horizon.

On the downside, EUR/USD faces immediate support at the March low of 1.0516 (March 15), followed by the 2023 low of 1.0481 (January 6).

In terms of potential resistance levels, a minor hurdle lies at the weekly high of 1.0767 (September 12), followed by a more significant barrier at the 200-day SMA at 1.0828. A break above this level could open the path for further recovery, targeting the temporary 55-day SMA at 1.0890, with the possibility of reaching the weekly high of 1.0945 (August 30). Surpassing this level could shift the focus to the psychological level of 1.1000, prior to the August peak of 1.1064 (August 10). Beyond that, the pair may retest the weekly top at 1.1149 (July 27) and potentially reach the 2023 high at 1.1275 (July 18).

However, it is important to note that as long as EUR/USD remains below the 200-day SMA, there is a possibility that downward pressure will persist.