• The Euro manages to pick some traction vs. the US Dollar.
• Stocks in Europe open Thursday’s session mostly with gains.
• EUR/USD drops to new multi-month lows near 1.0490.
• The USD Index (DXY) gives away some gains following new YTD peaks.
• Flash inflation figures in Germany will take centre stage in Europe.
• Final Q2 GDP readings, weekly Claims, Fedspeak come next in the US docket.

Following new eight-month lows around 1.0490, the Euro (EUR) now manages to gather some fresh upside traction against the US Dollar (USD), encouraging the EUR/USD to reclaim the 1.0500 barrier and above in the wake of the opening bell on the old continent on Thursday.

On the other hand, the Greenback’s rally faces some headwinds soon after hitting new 2023 peaks in the 106.80/85 band when gauged by the USD Index (DXY) on Thursday. The knee-jerk in the index also comes in tandem with the lack of direction in US yields, which remain at multi-year levels across the curve.

The same situation occurs in the German money market, where 10-year bund yields approach 2.90% for the first time since mid-July 2011.

From a monetary policy perspective, investors are still incorporating the expectation of the Federal Reserve (Fed) implementing a further 25 bps interest rate hike by the end of the year. At the same time, market conversations continue to suggest a potential pause at the European Central Bank (ECB), despite the ongoing inflation levels well above the bank’s target and growing worries about a possible recession.

Later in the session, Germany’s preliminary Inflation Rate will grab all the attention seconded by Economic Sentiment and Consumer Confidence in the broader euro bloc.

Across the ocean, investors are expected to closely follow the release of the final prints of the Q2 GDP Growth Rate seconded by usual weekly Initial Jobless Claims and speeches by Austan Goolsbee (Chicago) and Lisa Cook (FOMC Governor). In addition, Chief Jerome Powell will participate in an event with educators in Washington, DC.

Daily digest market movers: Euro shows some signs of life around 1.0500

• The EUR rebounds from multi-month lows vs. the USD.
• US and German yields trade without clear direction so far on Thursday.
• Markets factor in the Fed hiking rates by 25 bps before year-end.
• Investors anticipate potential interest rate cuts by the Fed in Q3 2024.
• Traders sees the ECB’s tightening campaign entering an impasse.
• Flash Inflation Rate in Spain expected to tick higher in September.
• Intervention fear remain as USD/JPY approaches the 150.00 hurdle.

Technical Analysis: Immediately to the downside comes 1.0481

Despite the ongoing mild rebound, EUR/USD remains well under pressure and continues to target the 2023 low in the 1.0480 region.

Looking at contention levels for the EUR/USD, immediate support emerges at the September low of 1.0491 (September 28) seconded by the 2023 low at 1.0481 (January 6).

When considering potential resistance levels, there is a minor obstacle at the weekly high of 1.0767 (September 12), and a more substantial barrier at the 200-day SMA at 1.0828. If the pair manages to surpass this level, it could open the path for further recovery, targeting the temporary 55-day SMA at 1.0865, with the potential to reach the weekly high of 1.0945 (August 30). Exceeding this level might shift the focus towards the psychological 1.1000 hurdle, ahead of the August peak of 1.1064 (August 10). Beyond these points, the pair could potentially retest the weekly top at 1.1149 (July 27), and even reach the 2023 high at 1.1275 (July 18).

However, it’s crucial to keep in mind that as long as the EUR/USD remains below the 200-day SMA, there remains a possibility of ongoing downward pressure.