Euro treads water just above 1.0500, looks at data and Fedspeak

• The Euro extends its weekly recovery against the US Dollar.
• Stocks in Europe open Thursday’s session in a mixed tone.
• EUR/USD clings to daily gains above the 1.0500 barrier.
• The USD Index (DXY) appears under pressure in the sub-107.00 zone.
• The Construction PMI in Germany weakens in September.
• The usual weekly Claims and Fedspeak take centre stage across the ocean.

The Euro (EUR) looks to extend the weekly rebound against the US Dollar (USD), motivating EUR/USD to hover around the area just above the 1.0500 hurdle on Thursday.

In the meantime, the Greenback manages to reverse an initial drop to the 106.50 region when measured by the USD Index (DXY) amidst some loss of momentum in the risk-associated galaxy and the still absence of a clear direction in US yields across different maturities.

On the monetary policy front, investors still anticipate the Federal Reserve (Fed) to raise interest rates by 25 bps before the end of the year. Simultaneously, market speculation about the European Central Bank (ECB) halting policy adjustments continues, despite inflation levels beyond the bank's target and rising worries of a future recession or stagflation in the region.

Data-wise, in the euro region, Construction PMI in Germany receded to 39.3 in September and improved a tad to 43.6 when it comes to the broader euro area. Earlier in the session, Germany’s trade surplus widened to €16.6B in August, while Industrial Production in France contracted at a monthly 0.3% in the same month.

In the US, the usual weekly Initial Jobless Claims are due along with Balance of Trade results and speeches by Cleveland Fed Loretta Mester (2024 voter, haw), Richmond Fed Thomas Barkin (2024 voter, centrist), San Francisco Fed Mary Daly (2024 voter, hawk), and FOMC Governor Michael Barr (permanent voter, centrist).

Daily digest market movers: Euro looks to USD dynamics for direction

• The EUR remains bid above 1.0500 vs. the USD on Thursday.
• US and German yields retreat from multi-year highs.
• Investors expect the Fed to hike rates one more time before year end.
• Markets anticipate that the ECB's tightening effort will come to a halt.
• Speculation of FX intervention in USD/JPY remains high.

Technical Analysis: Euro’s outlook remains negative below the 200-day SMA

EUR/USD seems to have regained composure and looks to consolidate the breakout of the 1.0500 barrier.

The resumption of the selling pressure could force EUR/USD to revisit the 2023 low of 1.0448 (October 3) and challenge test the round level of 1.0400. The breakdown of this level could put a potential test of the weekly lows of 1.0290 (November 30, 2022) and 1.0222 (November 30, 2022) back on the radar.

Further gains could encourage the pair to hit the next up-barrier at 1.0617 (September 29), before reaching the critical 200-day SMA at 1.0824. If the pair breaks beyond this level, it might test the weekly high of 1.0945 (August 30) as well as the psychological barrier of 1.1000. Once the August peak of 1.1064 (August 10) is cleared, spot could confront the weekly top of 1.1149 (July 27) and the 2023 peak of 1.1275 (July 18).

However, it is crucial to remember that as long as the EUR/USD continues below the 200-day SMA, additional bearish pressure is possible.