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The Euro (EUR) manages to regain some balance against the US Dollar (USD), encouraging EUR/USD to rebound from six-month lows around 1.0570 and trespassing the key barrier at 1.0600 the figure on Tuesday.

On the other hand, the Greenback sheds some ground after hitting new 2023 peaks in levels last traded in late November 2022 around 106.20 when measured by the US Dollar Index (DXY).

The pair's recovery comes in tandem with some corrective knee-jerk in US yields across different time frames, while the German 10-year bund yields also recede from earlier twelve-year peaks above 2.80%.

Looking at the macro scenario, the dollar’s sharp upside momentum remains propped up by expectations of the US Federal Reserve (Fed) view of keeping interest rates higher for longer. This stance was particularly exacerbated at the central bank's latest meeting on September 20.

As for the European Central Bank (ECB), recent board members found shared agreement towards a potential prolonged impasse in its hiking cycle despite the fact that inflation significantly exceeds the bank's target.

In the US docket, the Conference Board’s Consumer Confidence gauge will be in the limelight, along with New Home Sales, the FHFA’s House Price Index and the speech by FOMC’s permanent voter, Michelle Bowman (hawk).

Daily digest market movers: Euro meets temporary contention around 1.0570

• The EUR meets some contention near 1.0570 against the USD.
• US and German yields retreat from multi-year peaks.
• Markets expect the Fed to hike rates by 25 bps before end of 2023.
• Investors see potential interest rate cuts by the Fed in Q3 2024.
• Talks of a pause by the ECB remain on the rise.
• ECB's Gediminas Simkus deems talks of rate cuts as premature.
• ECB's Madis Muller ruled out further rate hikes.
• Intervention fears surround the price action around USD/JPY.

Technical Analysis: Euro keeps the door open to further downside

The selling pressure around EUR/USD remains everything but abated for yet another session, leaving the door wide open to further retracement in the short-term horizon.

On the downside, EUR/USD faces immediate support at the March 15 low of 1.0516, followed by the 2023 low of 1.0481 seen on January 6.

In terms of potential resistance levels, a minor hurdle lies at the September 12 high of 1.0767, followed by a more significant barrier at the 200-day Simple Moving Average (SMA) at 1.0828. A break above this level could open the path for further recovery, targeting the temporary 55-day SMA at 1.0890, with the possibility of reaching the August 30 high of 1.0945. Surpassing this level could shift the focus to the psychological level of 1.1000, prior to the August 10 peak of 1.1064. Beyond that, the pair may retest the July 27 top at 1.1149 and potentially reach the 2023 high at 1.1275 from July 18.

As long as EUR/USD remains below the 200-day SMA, there is a possibility that downward pressure will persist.

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