- The Euro maintains a bearish tone against the US Dollar.
- Stocks in Europe kept the mixed bias on Wednesday.
- The EUR/USD slipped back to new lows near 1.0530.
- The USD Index (DXY) extends its rally to new 2023 peaks.
- Consumer confidence in Germany is expected to worsen in October.
- US Durable Goods Orders surprised to the upside in August.
Bearish sentiment towards the Euro (EUR) against the US Dollar (USD) has been on the rise, causing EUR/USD to slide and hit new six-month lows near 1.0530 earlier on Wednesday.
In contrast, the greenback has been gaining strength for the fourth consecutive session, reaching 2023’s highest levels at approximately 106.50 according to the USD Index (DXY). This level hasn’t been observed since late November 2022.
A corrective move in US and German yields, which leave the region of recent multi-year highs despite broadly unchanged expectations in the monetary policy scenario, is present in conjunction with the pair’s continued decline.
Regarding the latter, investors persist in factoring in an additional 25 basis point rate increase by the Federal Reserve (Fed) by year-end. Meanwhile, discussions in the market continue to lean towards an impasse at the European Central Bank (ECB), even in light of persistent inflation levels that significantly surpass the bank’s target.
In the European calendar, consumer confidence in Germany is expected to weaken slightly to -26.5 in October, according to GfK.
In the US, mortgage applications tracked by MBA contracted 1.3% in the week to September 22, while durable goods orders expanded 0.2% in August vs. the previous month.
Daily digest market movers: Euro remains under heavy pressure
- The EUR keeps the offered stance unchanged against the USD.
- US and German yields are lower across different maturities.
- Investors continue to see the Fed raising rates by 25 bps before the end of 2023.
- Markets speculate on probable interest rate cuts by the Fed in Q3 2024.
- Market chatter over a pause by the ECB remains on the rise.
- ECB member of the Executive Board Frank Elderson says rates haven’t necessarily peaked.
- Intervention concerns remain well and sound around USD/JPY.
- The BoJ Minutes favored the continuation of the current monetary stance.
Technical Analysis: The Euro keeps favoring extra losses
The EUR/USD continues to demonstrate signs of weakness, trading in close proximity to the March low of around 1.0515.
On the downside, the 1.0516 low set on March 15 and the January 6 low of 1.0481 provide immediate support for the EUR/USD.
Regarding potential resistance levels, there is a minor obstacle at the September 12 high of 1.0767 and a more significant barrier at the 200-day Simple Moving Average (SMA) at 1.0828. If the pair manages to break above this level, it could pave the way for further recovery, targeting the temporary 55-day SMA at 1.0879 with the possibility of reaching the August 30 high of 1.0945. Surpassing this level could shift the focus towards the psychological level of 1.1000, followed by the August 10 peak of 1.1064. Beyond that, the pair may retest the July 27 top at 1.1149 and potentially reach the 2023 high at 1.1275 from July 18.
However, as long as the EUR/USD remains below the 200-day SMA, there is a possibility that downward pressure will persist.