- The EUR/USD pair recovered from a three-month low and recently retraced its intraday low.
- Along with the glaring discrepancies between ECB and Fed negotiations, the disparity between US and Eurozone statistics is also weighing on the Euro pair.
- The calendar will be adorned with mid-tier US employment statistics, final readings of the EU Q2 GDP, and German industrial production.
- As the “quiet” time of ECB policymakers begins and US soft landing concerns gain traction, Fed deliberations will be in the limelight.
As the European session begins on Thursday, the EUR/USD pair reverses the previous day’s corrective bounce off a multi-day low and takes offers to retest the intraday low near 1.0718. However, it also posts modest losses. I.
The European Central Bank’s (ECB) period of silence ahead of next week’s monetary policy meeting has caused the euro pair to retreat towards its lowest level in three months, which was recorded on Wednesday. In addition, traders anticipate German Industrial Production (IP) for July and the final figures of the Eurozone Gross Domestic Product (GDP) for the second quarter (Q2), which could further fuel fears of a Eurozone recession in contrast to US soft landing concerns and hawkish Fed talks.
The economic slowdown problems for the Old Continent are exacerbated by largely negative prints of the Eurozone figures combined with lackluster remarks from the ECB policymakers, which puts pressure on the Euro prices. German Factory Orders and Eurozone Retail Sales are two data points that have recently underwhelmed the bloc’s currency and cast doubt on ECB President Christine Lagarde’s argument of her hawkish leaning. Notably, a number of ECB officials appeared on television on Wednesday in an attempt to demonstrate their last-ditch ability to raise interest rates, but the markets were not impressed.
On the other hand, aggressive Fed talks to defend the US Dollar amidst hopes that the greatest economy in the world can sustain higher rates were bolstered by an unexpectedly strong ISM Services PMI and the lack of negative data of S&P Global PMIs for August. The Fed’s Beige Book, which advocates for a soft landing in the US, may be on the same page.
Sentiment and the EUR/USD pair were also affected by the US Dollar’s refuge demand, as well as by the US-China friction over trade conditions and Taiwan and rumors that the majority of major economies outside the US would see weaker economic performance.
S&P 500 Futures, which have shown modest losses at 4,468 by press time, are under pressure at the lowest point in a week as a result of these moves. They have been down for four straight days. Nevertheless, the yield on US 10-year Treasury bonds fluctuated close to the two-week high, which was recorded the day before at roughly 4.30%, or as late as 4.29%. Meanwhile, the yield on the two-year equivalent had its first daily loss in four days, retreating from the weekly peak to 5.01% as of this writing. As a result, the US Dollar Index (DXY) is still somewhat higher than it was six months ago, trading as high as 104.93.
In conclusion, the EUR/USD supports the market’s inclination toward the US Dollar, particularly in light of the ECB officials’ ban on public remarks. This underscores the US drivers for unambiguous orientations that are present in the market today.
A support-turned-resistance line that has been in place since March is joined by a two-month-old prior support line to limit short-term EUR/USD upside between 1.0755 and 1.0785, respectively. However, it’s important to note that the round number 1.0700 joins the very oversold RSI (14) to test the bears in the Euro before sending them to the low of 1.0635 in May.