Euro remains on the defensive near 1.0650 prior to US data, Lagarde speech.

The Euro adds to the weekly retracement against the US Dollar.Stocks in Europe accelerate their losses on Thursday.EUR/USD meets initial support around 1.0615.The USD Index (DXY) clings to its daily gains near 105.50.The Fed left the door open to another 25 bps rate hike before year-end.Weekly Initial Jobless Claims, Philly Fed Index will take centre stage in the US calendar.

ECB President Christine Lagarde speaks later in the session.Following an early dop to fresh multi-month lows, the Euro (EUR) manages to trim most of the losses against the US Dollar (USD), prompting EUR/USD to regain the 1.0650 zone during the midday in the old continent.

The Greenback extended its march north and printed new six-month peaks near 105.70 when measured by the USD Index (DXY) earlier in the European trading hours, as investors kept digesting the Federal Reserve (Fed) event.

The Dollar’s uptick, however, fizzled out and sparked a corrective move in the index to the mid-105.00s against the backdrop of a knee-jerk in the short end of the US yield curve vs. the continuation of the march north in the belly and the long end. Meanwhile, the 10-year bund yields regain the area of recent peaks near 2.75%.

Following the hawkish hold by the Fed at its meeting on Wednesday, Chairman Jerome Powell emphasized that there is still a significant journey ahead in achieving the target inflation rate of 2%. Additionally, he stated that the FOMC decided to maintain the current interest rates in light of the progress made thus far but remains prepared to raise rates when deemed suitable.

In the eurozone’s economic calendar, the preliminary reading of Consumer Confidence tracked by the European Commission is due, along with a speech by the ECB President Christine Lagarde.In the US, usual weekly Initial Jobless Claims are due, followed by the Philly Fed Manufacturing Index, the CB Leading Economic Index and Existing Home Sales.

Daily digest market movers: Euro remains poised to further decline

The EUR rebounds from fresh lows against the USD.

US and German yields advance marginally on Thursday.

The Fed left the door open to another 25 bps rate raise in the next months.

The BoE surprises everybody and leaves rates unchanged at 5.25%.

Markets price in probable rate cuts by the Fed in Q3 2024.

An impasse in the ECB’s hiking cycle appears to be gathering traction.

ECB’s Joaquim Nagel says it is not clear whether the bank hit the peak rate yet.

ECB’s Martin Kazaks favours keeping the restrictive stance for longer.

The SNB unexpectdely kept rates on hold at 1.75% (vs. an expected 25 bps hike)

Intervention fears surround the price action around USD/JPY.

Technical Analysis: Euro faces the next key support at 1.0516

EUR/USD reverses Thursday’s decline to multi-month lows near 1.0615, although the pair’s outlook remains tilted to the bearish side for the time being.

If the EUR/USD breaches its September 14 low of 1.0616, there is a chance it could revisit the March 15 low of 1.0516 before reaching the 2023 bottom of 1.0481 from January 6.

On the upside, there is a minor resistance level at the weekly high of 1.0767 from September 12, followed by the more significant 200-day Simple Moving Average (SMA) at 1.0828. If the pair manages to break above this level, it could pave the way for a continued recovery towards the temporary 55-day SMA at 1.0911, with the possibility of reaching the August 30 top of 1.0945. Surpassing the latter could bring the psychological level of 1.1000 into focus, followed by the August 10 peak of 1.1064. Beyond that, the pair might retest the July 27 high at 1.1149 and potentially reach the 2023 top at 1.1275 from July 18.

As long as the EUR/USD remains below the 200-day SMA, there is a chance that the pair will continue to face downward pressure.

GERMAN ECONOMY FAQS

What is the effect of the German Economy on the Euro?

The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany’s economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany’s economy strengthens, it can bolster the Euro’s value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro’s strength and perception in global markets.

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