Euro treads water just above 1.0500, looks at data and Fedspeak.

The Euro extends its weekly recovery against the US Dollar.Stocks in Europe open Thursday’s session in a mixed tone.EUR/USD clings to daily gains above the 1.0500 barrier.The USD Index (DXY) appears under pressure in the sub-107.00 zone.The Construction PMI in Germany weakens in September.The usual weekly Claims and Fedspeak take centre stage across the ocean.The Euro (EUR) looks to extend the weekly rebound against the US Dollar (USD), motivating EUR/USD to hover around the area just above the 1.0500 hurdle on Thursday.

In the meantime, the Greenback manages to reverse an initial drop to the 106.50 region when measured by the USD Index (DXY) amidst some loss of momentum in the risk-associated space and the absence of a clear direction in US yields across different maturities.

On the monetary policy front, investors anticipate the Federal Reserve (Fed) to raise interest rates by 25 bps before the end of the year. Simultaneously, market speculation about the European Central Bank (ECB) halting policy adjustments continues, despite inflation levels beyond the bank’s target and rising worries of a future recession or stagflation in the region.

Data-wise, in the euro region, Construction PMI in Germany receded to 39.3 in September and improved a tad to 43.6 when it comes to the broader euro area. Earlier in the session, Germany’s trade surplus came in at a higher than expected €16.6 billion in August, while Industrial Production in France contracted 0.3% on month

In the US, the usual weekly Initial Jobless Claims are due along with Balance of Trade results and speeches by Cleveland Fed President Loretta Mester (2024 voter, haw), Richmond Fed President Thomas Barkin (2024 voter, centrist), San Francisco Fed President Mary Daly (2024 voter, hawk), and FOMC Governor Michael Barr (permanent voter, centrist).

Daily digest market movers: Euro looks to USD dynamics for direction.The EUR remains bid above 1.0500 against the USD on Thursday.

US and German yields retreat from multi-year highs.Technical Analysis: Euro’s outlook remains negative below 200-day SMA

EUR/USD seems to have regained composure and looks to consolidate the breakout of the 1.0500 barrier.The resumption of the selling pressure could force EUR/USD to revisit the 2023 low of 1.0448 seen on Tuesday and challenge test the round level of 1.0400. The breakdown of this level could put back on the radar a potential test of the November 30, 2022, lows of 1.0290 and the 1.0222 seen on November 30, 2022.

Further gains could encourage the pair to hit the next up-barrier at 1.0617 from September 29, before reaching the critical 200-day Simple Moving Average (SMA) at 1.0824. If the pair breaks beyond this level, it might test the August 30 high of 1.0945 as well as the psychological barrier of 1.1000. Once the August 10 peak of 1.1064 is cleared, spot could confront the July 27 top of 1.1149 and the 2023 peak of 1.1275 from July 18.As long as the EUR/USD continues below the 200-day SMA, additional bearish pressure is possible.

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%).

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