Euro turns positive and now targets 1.0900 awaiting German CPI and US data.

• The Euro reverses the initial pessimism against the Dollar.
• European stock markets remain mixed for the time being on Wednesday.
• EUR/USD is now back to the 1.0900 barrier.
• The DXY Dollar Index loses ground and falls back to 103.50.
• Yields in the US and Germany rebound modestly awaiting key data.
• Inflation in Spain picked up in August to 2.6% year-on-year.
• Consumer confidence in the Eurozone worsened to -16.1 in August.

The Euro managed to reverse previous losses against the US Dollar, which encouraged the EUR/USD pair to regain bullish momentum and re-target the round 1.0900 level during European midday on Wednesday.

On the flip side, the Dollar succumbs to persistent selling pressure and adds to the sharp pullback fueled by Tuesday’s data, prompting the Dollar DXY Index to return to the 103.50/103.45 region by mid-week. The evolution of the prices of the Dollar continues to be accompanied by a slight rebound in US yields in the different maturities.

Meanwhile, the Federal Reserve’s (Fed) approach to tightening long-term monetary policy appears somewhat undermined by the latest data release, which also throws cold water on expectations of a 25 basis point rate hike in the meeting on November 1.

On the contrary, there is no news about the European Central Bank (ECB) regarding its possible decision on rates after the end of the summer season.

In terms of data for the region, preliminary inflation figures in Spain show a CPI increase of 2.6% yoy in August, while consumer confidence in Italy eased a bit to 106.5 and eased to -16 in what regards the euro zone in general. Later in the session, all attention is expected to turn to the release of advanced inflation figures for Germany for the current month.

In the United States, investor attention will focus on the release of the ADP report, followed by the second estimate of the second quarter GDP growth rate, pending home sales and preliminary figures for the goods trade balance.

Market Drivers: Euro Focuses on 1.0900 Barrier

• The Euro resumes the weekly upward trend against the Dollar.
• German and US bond yields rebound.
• Market participants will now focus on ADP’s results.
• In July, JOLT job openings fell to their lowest level since March 2021.
• The Fed’s talk of keeping monetary policy for longer appears to be losing momentum.
• Investors see the Fed on hold for the rest of the year.
• The PBoC is likely to adopt further stimulus measures in the near term.
• The BoJ’s Tamura favored keeping current loose monetary conditions.

Technical Analysis: Euro is now targeting 1.0930

EUR/USD’s weekly recovery faltered just before reaching the 1.0900 zone on Tuesday. The current bullish momentum could leave more room for further gains in the short term.

Should the bulls push harder, EUR/USD is expected to face a minor resistance level at the weekly high of 1.0930 (August 22), which also looks bolstered by the 100-day SMA. Further up is the 55-day SMA at 1.0967, ahead of the 1.1000 psychological barrier and the August high at 1.1064 (August 10). Once the latter is broken, the pair could challenge the high of 1.1149 (July 27). If the pair breaks out of this zone, it could relieve some of the bearish pressure and visit the 2023 high of 1.1275 (July 18). Further up is the 2022 high at 1.1495 (Feb 10), closely followed by the round 1.1500 level.

A resumption of the downside bias could encourage the pair to revisit the August low at 1.0765 (August 25) ahead of the May low at 1.0635 (May 31) and the March low at 1.0516 (March 15). Loss of this level could re-emerge on the horizon the test of the 2023 low at 1.0481 (Jan 6).

Furthermore, sustained losses are likely in the EUR/USD once the 200-day SMA (1.0810) is convincingly broken.