EUR/USD seems vulnerable near 100-day SMA, around 1.0920-25 area on stronger USD

• EUR/USD remains on the defensive for the fourth straight day and hangs near a multi-week low.
• Bets for more rate hikes by the Fed continue to underpin the USD and exert pressure on the pair.
• The fundamental backdrop seems tilted in favour of bears and supports prospects for further losses.

The EUR/USD pair edges lower for the fourth successive day on Thursday and languishes near its lowest level since July 7 touched the previous day. Spot prices trade around the 1.0925-1.0920 region during the Asian session, with bearish still awaiting a break below a technically significant 100-day Simple Moving Average (SMA) before placing fresh bets.

The prospects for further policy tightening by the Federal Reserve (Fed) assist the US Dollar (USD) to stand tall near a four-week high, which, in turn, is seen as a key factor acting as a headwind for the EUR/USD pair. The incoming stronger US macro data, including the ADP report released on Wednesday, points to an extremely resilient US economy and lifts expectations that Fed will have enough headroom to keep interest rates higher for longer. The hawkish outlook keeps the yield on the benchmark 10-year US government bond elevated near its highest level since November and continues to underpin the buck.

The aforementioned supportive fundamental backdrop, to a larger extent, overshadows the Fitch downgrade of the US credit rating, though a modest recovery in the global risk sentiment caps gains for the safe-haven Greenback. This, in turn, is holding back traders from placing fresh bearish bets around the EUR/USD pair and helping limit the downside, at least for the time being. Any meaningful recovery, however, still seems elusive in the wake of expectations that the European Central Bank (ECB) may finally pause its historic hiking campaign soon. This, along with looming recession risks, could undermine the Euro.

It is worth recalling that ECB President Christine Lagarde, in an interview with the French daily Le Figaro published Sunday, stressed that no decision had yet been made about what the central bank will do at its next meeting on September 14. Lagarde added that the next policy move would be based on the latest economic and financial data. This comes after the headline Euro Zone CPI eased to the 5.3% YoY rate in July from the 5.5% previous. The so-called core inflation (excluding those for energy, food, alcohol and tobacco), however, proved a tad sticky and was up by 5.5%, the same as during the previous month.

Nevertheless, the fundamental backdrop seems tilted slightly in favour of bearish traders and supports prospects for an extension of the EUR/USD pair's over a two-week-old downtrend from its highest level since February 2022. That said, it will still be prudent to wait for a sustained break and acceptance below the 100-day SMA before positioning for further losses. Traders now look to the US economic docket – featuring the Weekly Initial Jobless Claims, the ISM Services PMI and Factory Orders data for a fresh impetus. The focus, meanwhile, remains glued to the closely-watched US jobs data – the NFP report on Friday.

Technical levels to watch