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Euro keeps the bid tone in place above 1.0800 – Crypto News
- The Euro picks up further pace above 1.0800 against the US Dollar.
- Stocks in Europe maintain the optimism at the beginning of the week.
- The USD Index (DXY) appears offered near 104.00.
- Lack of direction prevails amidst US yields against a marginal uptick in German bunds.
- The Dallas Fed Manufacturing Index is the only datapoint on the US docket.
An auspicious start of the week sees the Euro (EUR) managing to pick up some upside traction against the US Dollar (USD) on Monday, driving EUR/USD to reclaim the area above the key 1.0800 hurdle, a region coincident with the critical 200-day SMA.
On the flip sde, the Greenback gives away part of the recent two-day advance and revisits the 104.00 neighbourhood when measured by the USD Index (DXY) in the context of a tepid recovery in the risk-associated assets and a marginal correction in US yields across the curve.
In the meantime, investors seem to have already digested Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday, where he left plenty of policy optionality on the table and once again reiterated that further rate hikes should not be ruled out.
On the latter, and according to CME Group, the probability of a 25 bps rate hike at the Fed’s November 1 meeting approaches 52%.
Concerning monetary policy, there is a revitalized discussion surrounding the commitment of the Federal Reserve to uphold a stricter stance for an extended duration of high interest rates. This increased focus arises from the impressive resilience of the US economy, despite the slight easing in the job market and decreased inflation statistics witnessed in recent months.
Simultaneously, inside the European Central Bank (ECB), conflicts among its council members have surfaced around the potential extension of rigorous measures beyond the summer period. These differences of opinion are causing a renewed sense of vulnerability, which is negatively impacting the Euro.
On the US calendar, the only scheduled release on Monday will be the Dallas Fed Manufacturing Index.
Daily digest market movers: Euro focused on the 200-day SMA (1.0805)
- The EUR trespasses the 1.0800 yardstick against the USD.
- German 10-year bund yields extend the rebound early on Monday.
- US yields tarde without a clear direction at the beginning of the week.
- The markets’ focus shifts to the US labour market.
- Fed’s tighter-for-longer narrative keeps running in the background.
- Powell’s speech favoured maintaining the tight stance for now.
- Investors see the Fed hiking rates by 25 bps in November.
Technical Analysis: Euro faces a minor support near 1.0760
The selling pressure around EUR/USD appears to have somewhat eased at the beginning of the new trading week, allowing the spot price some breathing room around the 1.0800 region.
Further decline could motivate the EUR/USD pair to revisit Friday’s low of 1.0765, ahead of the May 31 low of 1.0635 and the March 15 low of 1.0516. The loss of this level could prompt a test of the 2023 low at 1.0481 seen on January 6 to re-emerge.
Occasional bouts of strength, in the meantime, should meet provisional resistance at the 55-day SMA at 1.0965 prior to the psychological 1.1000 barrier and the August 10 high at 1.1064. Once the latter is cleared, spot could challenge the July 27 top at 1.1149. If the pair surpasses this region, it could alleviate some of the downward pressure and potentially visit the 2023 peak of 1.1275 recorded on July 18. Further up comes the 2022 high at 1.1495, which is closely followed by the round level of 1.1500.
Furthermore, sustained losses are likely in the EUR/USD pair once the 200-day SMA (1.0805) is breached in a convincing fashion.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.
The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.
QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
