Euro makes a U-turn and now looks at 1.0500

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<li><strong>The Euro now looks offered against the US Dollar.</strong></li>
<li><strong>Stocks in Europe reverse earlier gains.</strong></li>
<li><strong>EUR/USD reshi recovery falters ahead of the 1.0600 hurdle so far.</strong></li>
<li><strong>The USD Index (DXY) meets initial hurdle near 106.30.</strong></li>
<li><strong>No surprises from final Manufacturing PMIs in the euro zone.</strong></li>
<li><strong>The ISM Manufacturing PMI takes centre stage across the pond.</strong></li>
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<p>The Euro (EUR) reverses the initial optimism against the US Dollar (USD) on Monday, prompting sellers to return to the market and drag the <strong><a href="https://www.fxstreet.com/currencies/eurusd" target="_blank" rel="noopener">EUR/USD</a></strong> to the area of so far daily lows around 1.0540 at the beginning of the week.</p>
<p>Meanwhile, the Greenback appears to have regained composure and lifts the <a href="https://www.fxstreet.com/currencies/us-dollar-index" target="_blank" rel="noopener"><strong>USD Index (DXY)</strong></a> back to the 106.50 region amidst the broad-based sour sentiment in the risk-linked complex, while a small uptick in US yields across different timeframes also contributes to the upbeat mood in the Dollar. </p>
<p>Still around the <a href="https://www.fxstreet.com/bonds">bonds</a> market, the German 10-year bund yields follow their American peers and advance to the vicinity of 2.90%, partially reversing Friday’s knee-jerk.</p>
<p>The monetary policy <a href="https://www.fxstreet.com/rates-charts/forecast">forecast</a> remains unaltered, with investors expecting the Federal Reserve (Fed) to raise interest rates by 25 bps before the end of the year. Meanwhile, market talks about a probable stalemate in policy changes at the <a href="https://www.fxstreet.com/macroeconomics/central-banks/ecb">European Central Bank</a> (ECB) continue, despite inflation levels that surpass the bank’s objective and rising fears about a potential recession.</p>
<p>On the positioning front, EUR net longs extended the decline during the week ended on September 26, according to CFTC’s report, falling in line with the sharp sell-off observed in spot in the last few weeks.</p>
<p><a href="https://editorial.fxstreet.com/miscelaneous/Screenshot%202023-10-02%20at%2009.27.55-638318284794314895.png" target="_blank" rel="noopener"><img decoding="async" src="https://editorial.fxstreet.com/miscelaneous/Screenshot%202023-10-02%20at%2009.27.55-638318284794314895.png" style="width: 1023;height: 667;" /></a></p>
<p>In the domestic docket, the final Manufacturing PMI in Germany came in at 39.6 in September and 43.4 when it comes to the broader <a href="https://www.fxstreet.com/economic-calendar/country/c9822cb1-6cee-45f4-a9a2-89d136990308">eurozone</a>. In addition, the bloc’s <a href="https://www.fxstreet.com/economic-calendar/united-states">Unemployment Rate</a> held steady at 6.4% in August.</p>
<p><a href="https://editorial.fxstreet.com/miscelaneous/Screenshot%202023-10-02%20at%2010.47.45-638318332690943134.png" target="_blank" rel="noopener"><img decoding="async" src="https://editorial.fxstreet.com/miscelaneous/Screenshot%202023-10-02%20at%2010.47.45-638318332690943134.png" style="width: 758;height: 322;" /></a></p>
<p>In the US, all the attention is expected to be on the release of the <a href="https://www.fxstreet.com/news/ism-manufacturing-pmi-preview-us-factory-sector-set-to-extend-contraction-into-september-202310020632">ISM</a> Manufacturing PMI, seconded by Construction Spending, the final S&amp;P Global Manufacturing PMI, and speeches by Federal Reserve Bank of Philadelphia President Patrick Harker (voter, hawk), FOMC Governor Michael Barr (permanent voter, centrist), and <a href="https://www.fxstreet.com/macroeconomics/central-banks/fed">Federal Reserve Bank</a> of New York President John Williams (permanent voter, centrist).</p>
<h2>Daily digest market movers: Euro shifts its attention to the downside</h2>
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<li>The EUR loses momentum against the USD.</li>
<li>US and German yields advance modestly on Monday.</li>
<li>Markets factor in an extra rate hike by the Fed before year-end.</li>
<li>Investors foresee an <em>impasse</em> at the ECB’s tightening campaign.</li>
<li>Chinese PMIs came in mixed for September.</li>
<li>FX intervention fears remain well and sound around USD/JPY.</li>
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<h2>Technical Analysis: Immediate contention aligns at 1.0490</h2>
<p>EUR/USD looks to consolidate the rebound from last week’s lows around 1.0490.</p>
<p>If the EUR/USD rebound gets more serious, the pair should encounter the next up-barrier at the September 12 high of 1.0767, before reaching the crucial 200-day Simple Moving Average (SMA) at 1.0827. If the pair breaks beyond this level, it may set up a challenge of the transitory 55-day SMA at 1.0843, ahead of the August 30 top at 1.0945 and the psychological barrier of 1.1000. The surpass of the latter might prompt the pair to test the August 10 peak of 1.1064 ahead of the July 27 high of 1.1149 and the 2023 top of 1.1275 seen on July 18.</p>
<p>On the downside, the September 28 low of 1.0491 emerges as the next support prior to the 2023 low of 1.0481 from January 6.</p>
<p>As long as the EUR/USD remains below the 200-day SMA, the possibility of more negative pressure exists.</p>
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<h2>German economy FAQs</h2>
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<p>The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany’s economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany’s economy strengthens, it can bolster the Euro’s value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro’s strength and perception in global markets.</p>
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<p>Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the ‘Fiscal Compact’ following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.</p>
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<p>Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.</p>
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<p>German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond’s price, and it is therefore considered a more accurate reflection of return. A decline in the bund’s price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.</p>
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<p>The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).</p>
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<br /><a href="https://www.fxstreet.com/news/euro-extends-the-rebound-and-retargets-10600-ahead-of-us-key-data-202310020726">Source link </a></p><p>The post <a href="https://forextraderhub.com/euro-makes-a-u-turn-and-now-looks-at-1-0500.html">Euro makes a U-turn and now looks at 1.0500</a> first appeared on <a href="https://forextraderhub.com">Forex Trader Hub</a>.</p>