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Euro Recovers, Aiming for 1.0900 as Market Anticipates US ISM and Comments from Lagarde

1 December 2023 Written by Anna Segal  Finance Industry Expert Anna Segal

As the trading week draws to a close, the Euro (EUR) is witnessing a recovery against the U.S. Dollar (USD), with the EUR/USD pair approaching the 1.0900 mark. This rebound indicates a regaining of momentum for the Euro after a period of subdued performance. Simultaneously, the U.S. Dollar has relinquished some of its gains from the past two days, with the USD Index (DXY) falling back to around the 103.40 area. This shift occurs amidst a lack of clear direction in U.S. yields across various timeframes, reflecting a broader market uncertainty.

Speculations Investors are currently weighing the possibilities of interest rate cuts by both the Federal Reserve (Fed) and the European Central Bank (ECB) in the spring of 2024. This speculation contributes to the current cautious but anticipatory market stance.

Looking ahead, the market's focus will be on upcoming speeches by ECB officials, including Andrea Enria, Frank Elderson, and President Christine Lagarde. In the U.S., key data releases such as the ISM Manufacturing Index, Construction Spending, and the final S&P Global Manufacturing PMI for November will be closely monitored for further market direction.

Euro's Position Amidst Global Yields and PMIs

Currently, the Euro is exhibiting a somewhat directionless movement against the Dollar. The yields in the U.S. and Germany are showing mixed trends, reflecting the complexities in the global financial landscape. Additionally, the recent rise in China's Caixin Manufacturing PMI past the 50 mark in November adds another layer to the global economic picture.

Market participants are keenly awaiting ECB President Lagarde's speech later in the session. Similarly, Federal Reserve Chair Jerome Powell's participation in a roundtable discussion is also on the radar, potentially offering insights into future monetary policy directions.

The EUR/USD pair currently fluctuates below the 1.0900 level, following a significant pullback on Thursday. Should the pair experience further losses, the key 200-day Simple Moving Average (SMA) at 1.0817 might act as an initial support, followed by the 55-day SMA at 1.0679, providing temporary support. Breaking below these levels could expose the pair to the weekly low of 1.0495 (October 13) and even the 2023 low of 1.0448 (October 3), with the round level of 1.0400 as a further target.

On the flip side, any bullish attempts could face immediate resistance at the November high of 1.1017 (November 29), followed by the August peak of 1.1064 (August 10) and the July high of 1.1149 (July 27). The ultimate target remains the 2023 top at 1.1275 (July 18). The EUR/USD pair's overall positive outlook is expected to hold as long as it stays above the 200-day SMA. As the Euro shows signs of recovery against the Dollar, the focus shifts to forthcoming speeches by central bank leaders and key economic indicators. The market’s anticipation of these events, coupled with technical analysis, indicates a critical juncture for the EUR/USD pair, with potential for both upward and downward movements in the near term.

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