Euro pares gains to 1.0570 on increasing geopolitical tensions

• The Euro trades on the defensive against the US Dollar.
• Stocks in Europe open Friday’s session with losses.
• EUR/USD retreats from weekly highs over 1.0600.
• The USD Index (DXY) appears well supported by 106.00.
• Markets continue to digest Fed Chairman Powell’s comments.

The Euro (EUR) is trading slightly on the defensive against the US Dollar (USD), prompting EUR/USD to recede to the 1.0570-1.0580 band following Thursday’s weekly peaks past the 1.0600 barrier.

Meanwhile, the Greenback manages to regain some composure and advances modestly around the low-106.00s when gauged by the USD Index (DXY) amidst some corrective retracement in US yields across the curve and a knee-jerk in the sentiment around the risk complex.

Keeping the focus on monetary policy, investors anticipate the Federal Reserve (Fed) to retain its current stance of not changing interest rates at the November meeting, a view that was reinforced by comments from Fed’s Jerome Powell on Thursday.

Meanwhile, financial market participants are pondering the potential of the European Central Bank (ECB) discontinuing policy measures, despite inflation levels beyond the bank's target and growing concerns about the risk of a European zone economic slowdown or stagflation.

The European calendar will be empty at the end of the week.

No data releases scheduled across the ocean either, although investors are expected to follow speeches by Cleveland Fed President Loretta Mester (2024 voter, hawk) and Philadelphia Fed President Patrick Harker (voter, hawk).

Daily digest market movers: Euro runs out of steam north of 1.0600

• The EUR weakens a tad against the USD on Friday.
• US and German yields come under pressure and recede from peaks.
• Investors see the Fed keeping its interest rate unchanged in November.
• Markets expect believe the ECB to enter an impasse in its hiking cycle.
• Geopolitical fears continue to dominate the landscape.
• Japanese inflation rate eased to 3.0% in September.

Technical Analysis: Euro bullish attempts remain capped by 1.0600

The EUR/USD retreats from Thursday’s tops north of 1.0600 and revisits the 1.0570 zone at the end of the week.

If the bullish trend continues, EUR/USD may confront the October 12 high of 1.0639, before reaching the September 20 top of 1.0736 and the crucial 200-day Simple Moving Average (SMA) of 1.0817. A break above this level might signal a push to the August 30 peak of 1.0945 ahead of the psychological mark of 1.1000. Any more gains could put a potential test of the August 10 high of 1.1064 back on the radar prior to the July 27 top of 1.1149 and possibly the 2023 peak of 1.1275 seen on July 18.

If the selling bias returns, the 2023 low of 1.0448 from October 3 emerges as the immediate contention area ahead of the round level of 1.0400. If this region is breached, the weekly lows of 1.0290 (November 30, 2022) and 1.0222 (November 21, 2022).

As long as the EUR/USD continues below the 200-day SMA, the possibility of continuous bearish pressure exists.