The EUR/USD pair grapples with persistent downside momentum, with support continuing to elude. Despite a lack of immediate signs of a rebound, a consolidation phase between 1.0685 and 1.0710 appears plausible. The EUR/USD investing is exacerbated by the resolute stance of the US Dollar, driven by robust economic data and a cautious market sentiment.
EUR Swap Rate Struggle for Support Continues
In contrast, Eurozone figures paint a subdued picture. A marginal employment change of 0.2% during Q2, coupled with a downward revision in GDP from 0.3% to 0.1%, underscores the challenges faced by the Euro. Germany, a key player, witnessed a drop of 0.8% in Industrial Production in July, surpassing expectations.
Divergent Economic Outlooks Weigh Heavily
The divergence in economic outlooks between the Eurozone and the US contributes to the prevailing unease in the EUR/USD swap rates. Factors such as stagnation concerns versus the potential for a soft landing weigh heavily on its trajectory.
US Economic Data Boosts Greenback, but Caution Remains
Initial Jobless Claims in the US dropped to 216K, surpassing market projections for the week ending September 1. Additionally, Unit Labor Costs for Q2 saw a revision from 1.6% to 2.2%. While this initially boosted the Greenback, subsequent sharp reversals restrained further gains.
EUR/USD Investing: Navigating the Short-Term Outlook
In the short term, a period of consolidation between 1.0710 and 1.0685 is anticipated. A breach of recent lows might trigger further losses, targeting the June low at 1.0660. The 100 EUR to USD’s lack of stabilization leaves it exposed. Only a daily close above 1.0850 would alter the outlook to neutral.
Technical Indicators Point to Continued Downside Bias
The 4-hour chart reinforces the bearish bias, with indicators in oversold territory. Although the RSI is below 30, indicating oversold conditions, the downward momentum persists. A recovery above 1.0710 could alleviate pressure, with resistance anticipated at 1.0750.
The Dollar witnessed a surge on Thursday, initially propelled by an unexpected drop in US jobless claims. However, concerns arose over potential data distortions from the Labor Day holiday. Simultaneously, the effects of this month’s corporate bond market supply glut showed signs of moderating.
EUR/USD investing: Forum Sees Recovery from Intraday Lows
EUR/USD experienced a 0.29% decline but managed a slight recovery from its 1.0686 low on EBS, inching closer to the 76.4% Fibonacci retracement of this year’s uptrend at 1.0669.
Yield Spreads and their Impact on EUR/USD Investing
While two-year bund-Treasury yield spreads saw a 5bp rise, they remain only approximately 15bp above the year’s most negative levels. The prevailing narrative of a robust US economy versus a weaker Eurozone continues to exert pressure on the market.
USD/JPY: Treasuries and JGBs in Focus
USD/JPY began the NorAm session on a weaker note, with falling Treasury yields contrasting near-static JGB yields. The potential for Japanese intervention to support the yen added another layer of uncertainty.
Sterling’s Resilience Amid Market Volatility
Sterling saw a 0.27% dip but rebounded from its low of 1.2445 against EUR swap rates. The 200-day moving average at 1.2426 played a pivotal role in preventing further losses.
Anticipating Key Market Drivers
Beyond a flurry of Fed speakers, the day ahead featured crucial data releases, including Japanese labour figures, current account data, and GDP data, along with Canada’s jobs report. The following week is marked by high-impact events such as the US CPI release and the ECB meeting.
China’s Role in Market Sentiment
In the backdrop, USD/CNH rose by 0.3%, reaching levels not seen since November. Similarly to EUR/USD investing, USD/CNY touched heights last witnessed in 2007. Concerns about China’s economic outlook and escalating trade tensions with the West were amplified by Beijing’s broadening restrictions on iPhone usage by government officials.
