Anna 
EUR/USD experienced a modest decline on Tuesday, hovering around 1.0550, while the U.S. dollar index (DXY) saw an upward shift to the 106.30-106.40 range, recovering from previous losses due to ongoing selling pressure in the U.S. bond market.
Market attention remains closely fixed on monetary policies, with the Federal Reserve expected to maintain its stance of no interest rate changes for the remainder of the year. Simultaneously, financial market participants are contemplating the possibility of the European Central Bank (ECB) halting policy adjustments, despite inflation levels surpassing the bank’s target, as concerns grow over the potential for a recession or stagflation in the European region.
Specifically regarding the euro, the ZEW Institute is set to release the economic sentiment index for both Germany and the euro zone.
Across the Atlantic, various economic indicators are in focus, including retail sales, industrial production, the NAHB housing market index, business inventories, and speeches by FOMC President Michelle Bowman, New York Fed President John Williams, and Richmond Fed President Thomas Barkin, all of whom are centrists and permanent voters.
Market Update Highlights:
- EURUSD encounters selling pressure as the U.S. dollar rebounds.
- U.S. and German bond yields show upward momentum.
- The Federal Reserve is expected to keep interest rates unchanged.
- Expectations of the ECB extending its pause on rate hikes gain ground.
- Ongoing geopolitical tensions in the Middle East.
- Hawkish RBA meeting minutes.
Technical analysis suggests that EUR/USD faces initial resistance around 1.0560, with potential targets above and below depending on market dynamics.
Technical Analysis:
EUR/USD faces mild downward pressure, aiming towards the 1.0550 level on Tuesday. A continued uptrend could lead to retesting the October-December high at 1.0639, followed by key levels such as the weekly peak at 1.0736 (September 20) and the 200-day SMA at 1.0821. Further upside could challenge the psychological barrier of 1.1000, and potentially, the August high of 1.1064 (August 10) and the 2023 peak at 1.1275 (July 18).
On the flip side, renewed selling pressure may test the 2023 low of 1.0448 (October 3) and the critical support level at 1.0400. A breach below this point could open the door to retesting one-week lows at 1.0290 (November 30, 2022) and 1.0222 (November 21, 2022). It’s essential to note that as long as EUR/USD remains below the 200-day EMA, the potential for sustained downward pressure remains a consideration.
