Euro looks cautious near 1.0740 ahead of ECB rate decision.

The Euro appears mildly bid vs. the US Dollar.

Stocks in Europe opened Thursday’s session mostly in the red.EUR/USD continues to trade in a consolidative mood this week.The USD Index (DXY) has met decent resistance around 105.00 so far.The ECB is seen pausing its tightening campaign at its meeting.

Producer Prices and Retail Sales take centre stage across the Atlantic.

It is ECB Day, and the Euro (EUR) manages to print humble gains against the US Dollar (USD) on Thursday, motivating EUR/USD to hover around 1.0740 so far in the European morning.

On the other side, the Greenback navigates a tight range in the 104.70 zone when measured by the USD Index (DXY), accompanied by a broad-based lack of direction in US yields across the curve as well as alternating risk appetite trends.

With regards to monetary policy, investors persist in anticipating the possibility of interest rate reductions by the Federal Reserve (Fed) occurring sometime in the second quarter of 2024.Shifting our focus to the European Central Bank (ECB), market deliberations appear to suggest an impasse at the upcoming event and a 25 bps rate increase by the end of the year. This outlook is influenced by the current state of a somewhat divided Council.Still around the ECB, a probable pause in the bank’s hiking cycle appears justified by the persistent deterioration of key fundamentals in Germany and the broader euro area, while inflation in the region keeps running hot and well above the bank’s target. In addition, overtightening fears coupled with rising stagflation concerns should further underpin a probable (hawkish?) hold by the ECB later on Thursday.

Data-wise, in the US, the focus of attention is expected to be on the release of Producer Prices along with Retail Sales and the usual weekly Initial Jobless Claims.

EURO FAQS

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.

EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

How does inflation data impact the value of the Euro?

How does economic data influence the value of the Euro?

How does the Trade Balance impact the Euro?

Daily digest market movers: Euro looks prudent ahead of ECB, US data

The EUR gathers some fresh steam vs. the USD.

US and German yields have traded without a clear direction so far.

Investors see the ECB keeping the deposit rate unchanged on Thursday.

Australia released an upbeat jobs report.

Markets keep factoring in potential rate cuts by the Fed in Q2 2024.

US inflation, this time from Producer Prices, will remain in the limelight.

Market participants are expected to scrutinize Lagarde’s press conference.

Technical Analysis: Euro remains under downside pressure below 1.0830

EUR/USD appears to have embarked on a range bound theme, always below the 1.0800 hurdle, so far this week.

Should EUR/USD successfully break below its September low at 1.0685 (September 7), it may enter a phase of retesting the May low at 1.0635 (May 31) before potentially reaching the March low at 1.0516 (March 15). If the latter level is breached, it could initiate a possible examination of the 2023 low at 1.0481 (January 6).

On the other hand, the primary focus currently lies on targeting the crucial 200-day SMA at 1.0827. If the pair surpasses this level, a bullish momentum might ensue, leading to a challenge of the weekly peak at 1.0945 (August 30). This upward movement could be further supported by the provisional 55-day SMA at 1.0932. Subsequently, this scenario could pave the way for an advance towards the psychological level of 1.1000 and the August high at 1.1064 (August 10). If the spot clears this area, it could alleviate some of the bearish pressure and potentially aim for the weekly top at 1.1149 (July 27), followed by the 2023 high at 1.1275 (July 18).

It is crucial to note that as long as the EUR/USD remains below the 200-day SMA, there remains a possibility of a sustained decline in the pair.

EDITORS’ PICKS

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