• The Euro clings to daily against the US Dollar.
• Stocks in Europe trade with decent gains on Friday.
• EUR/USD picks up pace and reaches four-day highs past 1.0560.
• The USD Index (DXY) recedes further and flirts with 106.30.
• Factory Orders in Germany expanded in August.
• The US Nonfarm Payrolls will be the salient event across the ocean.

The Euro (EUR) is showing signs of further strength against the US Dollar (USD), motivating EUR/USD to advance to four-day highs above 1.0560 at the end of the week.

Meanwhile, the Greenback sheds further ground and revisits the 106.30 when tracked by the USD Index (DXY) on the back of extra improvement in risk sentiment, despite the tepid rebound in US yields across the curve.

In terms of monetary policy, investors see the Federal Reserve (Fed) keeping its interest rates unchanged for the remainder of the year. At the same time, market speculation continues about the European Central Bank (ECB) potentially pausing policy adjustments, despite inflation levels surpassing the bank’s target and growing concerns about a future recession or stagflation in the region.

On the euro calendar, Factory Orders in Germany expanded at a monthly 3.9% in August, while Retail Sales in Italy contracted 0.4% on month also in August.

In the US data space, all the attention will be on the release of September’s Nonfarm Payrolls and the Unemployment Rate. In addition, Consumer Credit Change for the month of August are also due, along with a speech by FOMC Governor Christopher Waller (permanent voter, hawk).

Daily digest market movers: Euro appears constructive ahead of US key data

• The EUR seems to consolidate the breakout of 1.0500 against the USD.
• US and German yields attempt a mild comeback on Friday.
• Investors’ bets for a 25 bps rate hike by the Fed lose traction.
• Markets see the ECB pausing its hiking campaign.
• ECB’s Isabel Schnabel does not rule out a mild recession.
• German government projects a 0.4% contraction of the economy in 2023.
• Market talks about FX intervention in USD/JPY appear unabated.

Technical Analysis: Euro’s outlook remains bearish below 1.0823

EUR/USD regains traction, advancing further north of 1.0500 on Friday.

The potential resumption of selling pressure on EUR/USD may lead to a revisit of the 2023 low at 1.0448 (October 3), with the possibility of testing the significant round level of 1.0400. If this level is surpassed, it could open the door for a potential retest of the weekly lows at 1.0290 (November 30, 2022), and 1.0222 (November 21, 2022).

On the other hand, if the pair continues to gain momentum, it could target the next upside barrier at 1.0617 (September 29), followed by the critical 200-day SMA at 1.0823. Breaking beyond this level might lead to a test of the weekly top of 1.0945 (August 30), before the psychological threshold of 1.1000. Should the pair trespass the weekly peak of 1.1064 (August 10), it could encounter another weekly top at 1.1149 (July 27) and even the 2023 high at 1.1275 (July 18).

However, as long as the EUR/USD remains below the 200-day SMA, there is a possibility of further bearish pressure.