Euro retreats to daily lows near 1.0660.

The Euro accelerate its losses against the US Dollar.European stocks en route to a negative close on Tuesday.Germany Industrial Production surprised to the downside.The Euro (EUR) continues its decline against the US Dollar (USD) from Monday, causing EUR/USD to retreat to lows not seen in two days, hovering around 1.0660 on Tuesday.

The Greenback, on the other hand, manages to regain its strength and pushes the USD Index (DXY) to levels around the 105.70-105.80 band. This strengthening of the Greenback is attributed to a renewed decrease in risk appetite, especially in response to weaker trade data from China. The downward movement in the pair is also accompanied by a marginal uptick in both US and German bond yields.

Regarding monetary policy, markets expect the Federal Reserve (Fed) to keep policy unchanged. The potential for an interest-rate hike in December appears to have lost momentum, particularly after the latest FOMC gathering and Friday’s publication of weaker-than-anticipated Nonfarm Payrolls data for October.

As for the European Central Bank (ECB), investors also favour an extended pause of its rate-hiking cycle, most probably until the second half of next year.

On the economic calendar, German Industrial Production contracted more than estimated at a monthly 1.4% in September and 3.7% vs. the same month of 2022. In addition, German Construction PMI receded to 38.3 in October. Looking at the broader eurozone, the Construction PMI ticked lower to 42.7 during last month and Producer Prices rose at a monthly 0.5% in September and dropped 12.4% over the last twelve months.

Across the Atlantic, Balance of Trade results showed a $61.5B deficit in September, while the IBD/TIPP Economic Optimism index and Consumer Credit Change are both due later in the session.

Additionally, market participants are expected to closely follow speeches by FOMC Governor Michael Barr (permanent voter, centrist), FOMC Governor Christopher Waller (permanent voter, hawk), NY Fed President John Williams (permanent voter, centrist), Dallas Fed President Lorie Logan (voter, hawk), Minneapolis Fed President Neel Kashkari (voter, centrist) and Chicago Fed President Austan Goolsbee (voter, centrist).

Daily digest market movers: Euro appears depressed well south of 1.0700

The EUR slips back to the 1.0660 region against the USD.US and German yields trade on the defensive so far on Tuesday.The Fed is seen keeping its monetary policy unchanged in December.Chicago Fed A. Goolsbee argued that the economy is weakening.Minneapolis Fed N. Kashkari ruled out rate cuts for the time being.The ECB is likely to keep its rates unchanged until H2 2024.The Middle East conflict looks everything but abated.The RBA raised its OCR by 25 bps, as widely expected.Chinese trade balance figures disappoint in October.

Technical Analysis: Euro could retest the 1.0650 zone near term

EUR/USD corrects lower and slips back to the area below the 1.0700 yardstick on Tuesday.The November peak of 1.0754 (November 6) follows next on the upswing for EUR/USD, seconded by the crucial 200-day Simple Moving Average (SMA) at 1.0805 and another weekly top of 1.0945 (August 30) before the psychological barrier of 1.1000. Beyond this zone, the pair may encounter resistance at the August high of 1.1064 (August 10), ahead of the weekly peak of 1.1149 (July 27) and the 2023 high of 1.1275 (July 18).

Sellers, on the other hand, are anticipated to face support at the weekly low of 1.0495 (October 13), before approaching the 2023 bottom at 1.0448 (October 15) and the round number of 1.0400.The pair’s outlook is predicted to remain bearish as long as it remains below the 200-day SMA.