Euro faces further consolidation near 1.0950 ahead of US Payrolls

• Euro keeps the consolidation in place vs. the US Dollar.
• Stocks in Europe reverse daily gains and return to the negative territory.
• EUR/USD gyrates around the mid-1.0900s on investor prudence.
• The USD Index (DXY) orbits around 102.50 amidst mixed yields.
• Retail Sales in the euro area contracted 1.4% YoY in June.

The Euro (EUR) has been trading without a clear direction against the US Dollar (USD), causing EUR/USD to remain within a narrow trading range around 1.0950 toward the end of the week.

A similar situation is observed with the USD Index (DXY), which is maintaining its trade in the mid-102.00s. This is happening due to the lack of a definite trend in US yields, even after the recent climb to the highest levels in nine months across various parts of the yield curve.

Meanwhile, investors are anticipated to pay close attention to the release of the Nonfarm Payrolls report for July. The report is expected to show an increase of around 200K jobs. This interest comes as the Federal Reserve has recently emphasized its reliance on economic data for its decisions, as highlighted during its event on July 26.

Currently, there is a lot of speculation that the Fed’s rate hike in July might have been its last for the foreseeable future. Additionally, the possibility of the European Central Bank (ECB) implementing further tightening measures beyond the summer seems to be losing momentum. Somewhat propping up the latter, the ECB published an article earlier on Friday suggesting that underlying inflation could have peaked in the first half of the year.

In terms of US economic data, the focus later in the North American session will be on the July Nonfarm Payrolls report and the Unemployment Rate.

Daily digest market movers: Euro appears muted around 1.0950

• The EUR maintains the trade in the lower end of the range vs. the USD.
• The upside bias in the USD Index seems to be taking a breather.
• CME Group’s FedWatch Tool sees no rate hikes by the Fed in H2 2023.
• Speculation that the Fed might have ended its hiking cycle runs high.
• The ECB hints at the idea that inflation peaked in H1 2023.
• ECB’s P. Lane subscribes to the idea of lower inflation in the next months.
• Markets’ attention remain on the US labour market on Friday.

Technical Analysis: Euro could slip back to 1.0830 in the near term

EUR/USD seems to have met some decent contention just above the 1.0900 yardstick, an area coincident with the transitory 55-day and 100-day SMAs.

The loss of the 1.0920 region, where the provisional 55-day and 100-day SMAs converge, leaves EUR/USD vulnerable to a probable drop to the July low of 1.0833 (July 6) ahead of the key 200-day SMA at 1.0742 and the May low of 1.0635 (May 31). South from here emerges the March low of 1.0516 (March 15) before the 2023 low of 1.0481 (January 6).

On the other hand, occasional bullish attempts could motivate the pair to initially dispute the weekly top at 1.1149 (July 27). Above this level, the downside pressure could mitigate somewhat and could encourage the pair to test the 2023 high at 1.1275 (July 18). Once this level is cleared, there are no resistance levels of significance until the 2022 peak of 1.1495 (February 10), which is closely followed by the round level of 1.1500.

Furthermore, the constructive view of EUR/USD appears unchanged as long as the pair trades above the key 200-day SMA.