Euro reclaims the 1.0600 barrier and above ahead of US PCE

• The Euro advances further vs. the US Dollar.
• Stocks in Europe open with generalized gains on Friday.
• EUR/USD surpasses 1.0600 and prints four-day highs.
• The USD Index (DXY) extend the rejection from recent 2023 peaks.
• Germany reported a firm labour market report.
• US inflation tracked by the PCE, final Consumer Sentiment are due next.

The Euro (EUR) manages to gather extra steam vs. the US Dollar (USD), motivating EUR/USD to retake the key 1.0600 hurdle and beyond at the end of the week.

In the meantime, the Greenback continues to correct lower from recent yearly peaks around 106.80 and breaches the 106.00 support with marked conviction when tracked by the USD Index (DXY). The dollar’s pullback is also accompanied by some improvement in the risk complex and rising jitters around a potential US federal government shutdown as soon as this weekend.

The recovery in the pair also comes amidst some loss of momentum in US and German yields after hitting multi-year tops earlier in the week.

The monetary policy outlook remains unchanged, with investors still factoring in the anticipation of a 25 bps interest rate hike by the Federal Reserve (Fed) before the year concludes. Meanwhile, discussions in the market persist regarding a potential impasse in policy adjustments at the European Central Bank (ECB), despite inflation levels that exceed the bank's target and mounting concerns about a potential recession.

In the euro calendar, Retail Sales in Germany contracted 2.3% YoY in August, while the Unemployment Change increased by 10K individuals in September and the Unemployment Rate held steady at 5.7% in the same period. Later in the session, the flash Inflation Rate in the broader euro area will be in the spotlight.

Across the pond, inflation gauged by the PCE and Core PCE will take centre stage along with Personal Income, Personal Spending, flash Goods Trade Balance and the final print of the Michigan Consumer Sentiment.

Daily digest market movers: Euro grabs some breathing room on USD selling

• The EUR bounces off eight-month lows vs. the USD.
• US and German yields extend the corrective decline so far on Friday.
• Investors keep pricing in another rate raise by the Fed before year-end.
• Markets expect a pause at the ECB’s hiking cycle.
• UK Q2 GDP figures surprise to the upside.
• Intervention concerns persist as USD/JPY targets the 150.00 barrier.

Technical Analysis: Downside pressure should alleviate above 1.0830

EUR/USD extends the recovery to the area beyond 1.0600 the figure on Friday, managing at the same time to bounce off the oversold zone.

In case the recovery in EUR/USD becomes more serious, the pair should meet the next up-barrier at the weekly high of 1.0767 (September 12), prior to the key 200-day SMA at 1.0828. Should the pair surpass this level, it may pave the way for a test of the transitory 55-day SMA at 1.0855 ahead of the weekly top at 1.0945 (August 30) and the psychological hurdle of 1.1000. If the pair clears the latter, it could then challenge the August peak of 1.1064 (August 10) before the weekly peak at 1.1149 (July 27) and the 2023 high of 1.1275 (July 18).

On the downside, there is immediate contention at the September low of 1.0491 (September 28) seconded by the 2023 low of 1.0481 (January 6).

However, it's essential to bear in mind that as long as the EUR/USD remains below the 200-day SMA, the potential for ongoing downward pressure persists.