- The euro remains offered against the US dollar.
- Stocks in Europe started the day well on the defensive.
- The EUR/USD loses ground and revisits six-month lows around 1.0570.
- The USD Index (DXY) reached fresh year highs north of 106.00.
- US consumer confidence will take center stage in the American session.
The bearish sentiment surrounding the Euro (EUR) against the US Dollar (USD) gathers further steam, pushing EUR/USD to new six-month lows around 1.0570 on Tuesday.
On the other hand, the greenback advances for a 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 US Dollar Index (DXY).
The sharp downside in the pair comes amidst the intense rally in US yields across different timeframes, while the German 10-year bund yields trade at a twelve-year peak above 2.80%.
When examining the macro scenario, expectations that the US Federal Reserve (Fed) will maintain higher interest rates for a longer period of time continue to support the dollar’s sharp upward momentum. This stance was particularly exacerbated at the central bank’s latest meeting on September 20.
As for the European Central Bank (ECB), recent board members found shared agreement regarding a potential prolonged impasse in its hiking cycle, despite the fact that inflation significantly exceeds the bank’s target.
In the US docket, the Conference Board’s Consumer Confidence Gauge will be in the limelight, along with 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 against the USD.
- US and German yields navigate the area of multi-year peaks.
- Markets expect the Fed to hike rates by 25 basis points before the 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 the USD/JPY.
Technical Analysis: Euro risks drop to 1.0516
The selling pressure around EUR/USD remains everything but abated for yet another session, leaving the door wide open to a further retracement in the short-term horizon.
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.
The September 12 high of 1.0767 serves as a minor obstacle in terms of potential resistance levels, and the 200-day Simple Moving Average (SMA) at 1.0828 serves as a more significant barrier. 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 August 30 high of 1.0945. Surpassing this level could shift the focus to the psychological level of 1.1000, prior to 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.
As long as the EUR/USD remains below the 200-day SMA, there is a possibility that downward pressure will persist.