Euro picks up pace and reclaims 1.0850 prior to NFP, US ISM

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<li><strong>The Euro bounces off lows near 1.0830 against the US Dollar as risk appetite improves.</strong></li>
<li><strong>Stocks in Europe start the session in an upbeat mood.</strong></li>
<li><strong>The USD Index (DXY) looks offered in the mid-103.00s.</strong></li>
<li><strong>No surprises from the final Manufacturing PMIs in Germany, Eurozone.</strong></li>
<li><strong>US Nonfarm Payrolls, ISM manufacturing are next of note.</strong></li>
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<p>The Euro (EUR) manages to regain some balance against the US Dollar (USD) following a drop to 1.0830, helping the <a href="https://www.fxstreet.com/currencies/eurusd" target="_blank" rel="noopener"><strong>EUR/USD</strong></a> pair to retake the 1.0850 region at the end of the week.</p>
<p>The modest advance in the pair comes in line with the offered stance in the Greenback. The <a href="https://www.fxstreet.com/currencies/us-dollar-index" target="_blank" rel="noopener"><strong>USD Index (DXY)</strong></a>, which tracks the US Dollar against a basket of six other major currencies, gyrates around the 103.50 zone amidst the lack of a clear direction in US yields across different maturities.</p>
<p>In the meantime, investors continue to reprice a pause by the Federal Reserve in its tightening campaign. The upcoming release of the <a href="https://www.fxstreet.com/news/nonfarm-payrolls-forecast-us-labor-market-expected-to-show-further-signs-of-cooling-in-august-202309010600">Nonfarm Payrolls</a> for August should lend further insight into this view.</p>
<p>Back to the <a href="https://www.fxstreet.com/macroeconomics/central-banks/ecb">European Central Bank</a> (ECB), there is a great deal of uncertainty regarding the potential steps beyond the summer amidst a pretty divided Governing Council and rising speculation that a stagflation scenario could be brewing in the region.</p>
<p>Data-wise, final Manufacturing PMIs in Germany and the broader euro area came in at 39.1 and 43.5, respectively, for the month of August. The readings, which signal a persisting contraction in factory activity, were broadly in line with the preliminary estimates.</p>
<p><a href="https://editorial.fxstreet.com/miscelaneous/Screenshot%202023-09-01%20at%2010.25.24-638291535278455224.png" target="_blank" rel="noopener"><img decoding="async" src="https://editorial.fxstreet.com/miscelaneous/Screenshot%202023-09-01%20at%2010.25.24-638291535278455224.png" style="width: 721;height: 315;" /></a></p>
<p>Later in the American session, <a href="https://www.fxstreet.com/macroeconomics/economic-indicator/nfp">Nonfarm Payrolls</a>, Unemployment Rate and the ISM Manufacturing PMI will take the centre stage. Construction Spending and the final S&amp;P Global Manufacturing PMI data for the US will also be published.</p>
<h2>Daily digest market movers: Euro bounces off three-day lows</h2>
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<li>The Euro gathers some strength against the USD.</li>
<li>Final PMIs in Europe broadly matched the preliminary prints.</li>
<li>China’s Caixin Manufacturing PMI returned to expansionary territory.</li>
<li>The PBoC reduced the FX RRR to 4% to support the Chinese yuan.</li>
<li>Investors’ focus shifts to NFP, ISM Manufacturing.</li>
<li>Investors see the Fed on hold for the remainder of the year.</li>
</ul>
<h2>Technical Analysis: Euro could advance further once 1.0950 is cleared</h2>
<p>EUR/USD regains some upside traction following Thursday’s strong pullback and three-day lows near 1.0830.  </p>
<p>In case bulls regain the upper hand and EUR/USD surpasses Wednesday&#8217;s weekly top of 1.0945, the pair is expected to meet the provisional 55-day Simple Moving Average (SMA) at 1.0965 prior to the psychological 1.1000 barrier and the August 10 monthly top at 1.1064. Once the latter is cleared, spot could challenge July&#8217;s 27 peak at 1.1149. If the pair surpasses this region, it could alleviate some of the downward pressure and potentially visit the 2023 peak of 1.1275 seen on July 18. Further up comes the 2022 high at 1.1495, which is closely followed by the round level of 1.1500.</p>
<p>The resumption of the downward bias could motivate the pair to initially test the key 200-day SMA at 1.0815 ahead of the August 25 low of 1.0765. The breach of the latter exposes the May 31 low of 1.0635 prior to the March 15 low of 1.0516 and the 2023 low at 1.0481 recorded on January 6.</p>
<p>Sustained losses are likely in EUR/USD once the 200-day SMA is breached in a convincing fashion.</p>
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<h2>Euro FAQs</h2>
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<p>The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it <a href="https://stats.bis.org/statx/srs/table/d11.3">accounted</a> for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.<br />EUR/USD is the most heavily traded currency pair in the world, <a href="https://fxssi.com/the-most-traded-currency-pairs">accounting</a> for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).</p>
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<p>The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.<br />The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.<br />The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.</p>
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<p>Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.<br />Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.</p>
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<p>Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.<br />A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.<br />Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.</p>
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<p>Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.<br />If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.</p>
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<br /><a href="https://www.fxstreet.com/news/euro-regains-the-smile-and-revisits-10850-ahead-of-key-us-data-202309010827">Source link </a></p><p>The post <a href="https://forextraderhub.com/euro-picks-up-pace-and-reclaims-1-0850-prior-to-nfp-us-ism.html">Euro picks up pace and reclaims 1.0850 prior to NFP, US ISM</a> first appeared on <a href="https://forextraderhub.com">Forex Trader Hub</a>.</p>