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The Euro falls to multi-week lows and approaches 1.0750, focus on the ECB

  • The Euro resumes its slide against the US Dollar.
  • Stock markets in Europe open Tuesday’s session in the red.
  • EUR/USD is challenging the 1.0750 zone, at multi-week lows.
  • US Dollar DXY Index advances to three-month highs.
  • The US markets return to their usual activity after the holiday on Monday.
  • The latest services PMIs will be published in the euro zone.
  • The ECB will publish its survey on consumer expectations.
  • Interventions are expected from Schnabel, De Guindos and Fernández-Bollo from the ECB.

The Euro (EUR) continues to lose ground against the US Dollar (USD) and drags the EUR/USD pair to fresh multi-week lows near the 1.0750 level on Tuesday. The resurgence of selling pressure around the pair seems underpinned by lower numbers from the service sector in China, according to PMI results released by Caixin earlier in the Asian session.

Investors’ safe-haven bias supported the greenback early in the European morning and lifted the DXY Dollar Index to fresh highs around 104.50, amid still unclear direction for US yields. . and Germany.

Meanwhile, there remains great market confidence regarding the Federal Reserve’s decision to halt its interest rate hike campaign for the remainder of the year. In addition, speculation has started to surface that interest rate cuts might not materialize until March 2024.

On the other hand, the European Central Bank (ECB) is navigating in a climate of greater uncertainty regarding the possible course of interest rates beyond the summer months. Debates in the markets revolve around the concept of stagflation, which further contributes to the prevailing feeling of ambiguity.

In the euro area’s economic calendar, the publication of the latest services PMI for the month of August is followed by the publication of the ECB Consumption Expectations Survey and the speeches by the members of the Council Eduardo Fernández-Bollo, Isabel Schnabel and Luis From Guindos.

Market Drivers: The Euro suffers again from the weakness of Chinese data

  • The Euro is facing headwinds against the Dollar on Tuesday.
  • The Caixin Services PMI and China Composite PMI weakened in August.
  • The services sector will occupy a central place in the economic agenda of the eurozone.
  • Disinflation and cracks in the US labor market support the Fed’s doldrums.
  • Investors believe the Fed could cut rates in the second quarter of 2024.
  • The RBA left the OCR unchanged at 4.10%, as expected.

Technical Analysis: The Euro is at risk of falling to 1.0635

EUR/USD remains under pressure and the recent break of the key 200-day SMA (at 1.0819) seems to underpin the likelihood of further losses on the near-term horizon.

If EUR/USD accelerates its losses, it could revisit the May low of 1.0635 (May 31) before targeting the March low of 1.0516 (March 15). Loss of this last level could trigger a possible test of the 2023 low at 1.0481 (Jan 6).

To the upside, the pair is expected to head to the 200-day SMA at 1.0819. Higher up, bulls should target the weekly high of 1.0945 (Aug 30) ahead of the 55-day SMA at 1.0958 and ahead of the 1.1000 psychological barrier and August high at 1.1064 (Aug 10). Once the latter is broken, the pair could challenge the weekly 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.

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

Source: Fx Street

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