EUR/USD dropped closer to a nearly two-decade low on Thursday amid resurgent USD demand. Hawkish Fed expectations, surging US bond yields, recession fears continue to underpin the buck. Traders now move on the sidelines as the focus remains glued to the US jobs data (NFP) on Friday. The EUR/USD pair came under renewed selling pressure on Thursday and dived to the 0.9900 neighbourhood, back closer to its lowest level since December 2002 touched last week. The US dollar caught aggressive bids and reached a fresh two-decade high, which, in turn, exerted heavy downward pressure on the major. The recent hawkish comments by several Fed officials lifted market bets for another supersized 75 bps rate hike at the upcoming FOMC meeting on September 20-21. This, along with upbeat US economic data, continued to underpin the greenback. The US Initial Jobless Claims unexpectedly fell to 232K during the week ended August 26. Furthermore, the US Manufacturing PMI was revised higher to 51.5 for August from the flash estimate of 51.3 and the ISM Manufacturing Index remained stable at 52.8. The data reinforced expectations for a more aggressive policy tightening by the Fed and pushed the US Treasury bond yields higher. In fact, the yield on the risk-sensitive 2-year US government bond surged to the highest since 2007, while the benchmark 10-year yield rose to more than a two-month peak. Apart from this, growing worries about a deeper global economic downturn, amid headwinds stemming from fresh COVID-19 lockdowns in China and the war in Ukraine, further benefitted the safe-haven buck. The shared currency, meanwhile, failed to gain any respite from rising bets for a 75 bps rate hike by the European Central Bank at its meeting next week. That said, a later recovery in the US equity markets capped gains for the USD and assisted the EUR/USD pair to stall its sharp intraday decline and edge higher during the Asian session on Friday. Spot prices hold steady above mid-0.9900s, though lack bullish conviction as the market focus remains glued to the closely-watched US monthly employment details, due for release later during the early North American session. The popularly known NFP report will provide a fresh insight into the economy's health in the face of rising rates and stubbornly high inflation. This, in turn, should play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the EUR/USD pair. Technical Outlook From a technical perspective, the 0.9910-0.9900 area now seems to have emerged as immediate strong support and should act as a pivotal point. A convincing break below will be seen as a fresh trigger for bearish traders and set the stage for an extension of a well-established downtrend. The EUR/USD pair might then accelerate the fall towards the next relevant support near the 0.9850-0.9845 zone before eventually dropping to the 0.9800 round figure. On the flip side, momentum back above the parity mark might continue to confront stiff resistance near the 1.0050-1.0055 supply zone. This is followed by last Friday’s swing high, just ahead of the 1.0100 mark, which if cleared decisively will suggest that the EUR/USD pair has formed a near-term bottom. The subsequent move up has the potential to lift spot prices to the 1.0150-1.0155 intermediate hurdle en route to the 1.0200 round figure and the 1.0260-1.0270 resistance zone.

EUR/USD - 1.0027 Despite euro's decline from last Friday's 1.0089 high to 0.9914 Monday, subsequent erratic rise to 1.0078 in New York yesterday due to active buying in euro on market's hawkish EBC outlook suggests choppy swings above Aug's 20-year 0.9901 trough may continue and above 1.0089 may head to 1.0123, 1.0146/47. On the downside, only a daily close below 1.0000 would yield re-test of Wednesday's 0.9972 low, break would extend further weakness towards 0.9947. Data to be released on Thursday Australia AIG manufacturing index, manufacturing PMI, building capex, capital expenditure, Japan Jibun bank manufacturing PMI, China Caixin manufacturing PMI. Germany retail sales, S n P manufacturing PMI, Swiss CPI, retail sales, manufacturing PMI, Italy S n P manufacturing PMI, unemployment rate, GDP, France S n P manufacturing PMI, EU S n P manufacturing PMI, employment change, U.K. S n P manufacturing PMI. U.S. initial jobless claims, continuing jobless claims, labor costs, productivity, S n P manufacturing PMI, construction spending, USM manufacturing PMI, Canada building permits and S n P manufacturing PMI.

Europe It’s been another disappointing day for the FTSE100, with a slide in energy prices weighing on the likes of BP and Shell, with both crude oil and natural gas prices sliding for the second day in succession. Up until the end of last week the FTSE100 had been on course for a positive month, however the last 3 days, and the hawkish tone from Powell’s Jackson Hole speech, has seen the rug pulled out from underneath the positive mood. We’re also seeing declines in the likes of National Grid, SSE and Centrica as concerns about a windfall tax on some of their profits resurfaces. Due to the way that electricity prices are linked to the gas price, some companies are reaping huge profits given their electricity is being generated by renewables, which has a lower cost of generation. This is giving these companies a nice windfall, which governments are starting to cast an envious eye over. With the economic outlook looking increasingly bleak it’s not been a great month for the likes of the UK house builders, which have seen further falls in August, with Persimmon, Taylor Wimpey and Barratt Developments all down over 14%, with Next and JD Sports also down over 10%.   US US markets opened modestly higher today after the latest ADP jobs report came back with an unexpectedly low 128k jobs added in August, although the gains have proved to be rather laboured as we come to the end of what has been a negative month for US markets.    Snap shares jumped higher on the open after confirming it was looking to cut 20% of its workforce as well as embarking on a series of measures to restructure the business. Bed, Bath & Beyond shares have seen another turbulent session after the company said it may well look to sell and issue new shares from time to time in order to help it to pay down its debt levels, as well as for other general corporate purposes. The company also announced that it sees a Q2 sales decline of 26%, while announcing the closure of 150 stores and significant job losses, including senior management positions, including the COO and chief store officer.   In the lead-up to yesterday’s Q3 numbers from HP there was some concern about the effects of slowing PC demand on its outlook over the rest of the year. These fears proved well-founded as the company downgraded its profit forecast, on the back of a slowdown in notebook sales, which were down 32%. Q3 revenue came in at $14.66bn, almost $1bn below expectations, primarily due to lower PC sales. On the profits front, these were better, coming in as expected at $1.04c a share, however Q4 guidance downgrades has prompted the share price to drop sharply. For Q4 profits guidance was disappointing, with downgrades to Q4 and the full fiscal year. Q4 profits are expected to come in at $0.84c a share, down from $1.07c a share, while the full year outlook has been downgraded to $4.07 mid-point from $4.30. FX The euro has continued to gain against the pound as markets start to price in the prospect of a 75bps rate hike next week. The rebound in the euro is a little surprising given that the latest inflation numbers for August posted another record high of 9.1%, and while inflation appears to be showing some signs of softening in France and Germany, in Italy it remains on fire. The latest August numbers saw headline CPI rise to 9% from 8.4%, however in July PPI rose to an annualised 45.9%, up from 41.9%, which suggests further upward pressure is coming, which will cause all manner of problems for the ECB.     The pound is slowly catching the Japanese yen as being the worst performer this year after another poor month, as it looks to post its worst performance against the US dollar since October 2016, briefly dipping below the 1.1600 level. Sentiment around the pound has become supremely negative despite an increasing expectation that the Bank of England will have to raise rates sharply over the next few months to tame a late year surge in inflationary pressure. The worst performer today has been the Norwegian krone on the back of the slide in energy prices.    Commodities UK natural gas prices for October have seen a sharp drop from the 714p peaks of last week, falling for the second day in succession, dropping below 450p today, despite Russia closing down the Nord Stream 1 pipeline for “maintenance” purposes. Crude oil prices have also come under pressure, after another set of Chinese economic numbers that pointed to a weak economy, alongside reports of further restrictions being imposed in places like Shenzen and Dalian in response to fresh covid outbreaks....

Declining oil prices have hurt the FTSE today, while record eurozone inflation comes in the face of a potential 75bp rate hike from the ECB. FTSE suffering as energy names come under pressure “The FTSE 100 has led the losses in Europe, with a weakening pound doing little to help stifle the downdraft that sparked yet another one-month low for the index. Unfortunately, the prominence of commodity stocks within UK markets has proven its undoing, with energy names Tullow oil, Energean, and BP feeling the pinch as oil looks to be heading for the worst losing run in over two months. On the flip-side, uranium has enjoyed a welcome return to the spotlight, with the growing support behind a nuclear resurgence helping to elevate stocks over the past week.” Eurozone inflation hits yet another record as ECB prepares potential 75bp hike “Inflation pressures continue to dampen market sentiment, with eurozone inflation hitting a record high for the ninth consecutive month. Comments from ECB member Holzmann essentially guaranteed a minimum 50Bp rate hike next week, with 75Bps also being debated. Unfortunately, there looks to be little reason for optimism going forward, with the ECB, Fed, and BoE all faced with the prospect of ramping up interest rates in the midst of a recession and cost of living crisis. ”

EUR/USD Current Price: 1.0028 Market participants remain concerned about economic growth and aggressive monetary tightening. Germany's inflation kept rising in August, according to preliminary estimates. EUR/USD is holding on to modest gains above 1.0000, but buyers are losing interest. The EUR/USD pair posted a modest daily advance on Tuesday, trading at around 1.0030 heading into the Asian opening. The shared currency overcame persistent dollar demand as investors still increased bets on an ECB 75 bps rate hike in September. Financial markets kick-started the day with a better tone, but the sentiment soured ahead of Wall Street’s opening. Asian and European equities closed in the green, but US indexes edged firmly lower as government bond yields resumed their advances. Generally speaking, market participants are concerned about slowing growth, exacerbated by aggressive monetary policies meant to take down inflation. Federal Reserve chief Jerome Powell acknowledged the burden of higher rates on households and economic progress but made it clear the central bank would continue with the tightening plan. Meanwhile, macroeconomic data was mixed. The August EU Economic Sentiment Indicator contracted to 97.6 from 98.9, worse than expected. Consumer Confidence in the same period remained unchanged at -24.9. German inflation, in the meantime, was higher than anticipated in August, up by 7.9% YoY, according to preliminary estimates. US figures were more encouraging, as the JOLTS Job Openings report showed 11.24 million job openings in July. The Conference Board Consumer Confidence improved in August to 103.2 after falling in the previous three months. On Wednesday, the EU will release the preliminary estimate of its August Consumer Price Index, which is foreseen to be up by 9% YoY, a new multi-decade high. On the other hand, the US will publish a revamped ADP Employment Change report on private job creation. ADP has changed how it calculates the figure,  and this first release of the new report may have a limited impact on price behavior. EUR/USD short-term technical outlook Despite the intraday advance, the daily chart for the EUR/USD pair shows that the risk remains skewed to the downside. The pair keeps developing below bearish moving averages, with the 20 SMA providing dynamic resistance at around 1.0120. The Momentum indicator turned south well below its midline, while the RSI indicator hovers around 40, reflecting bears are still in control of the pair. The 4-hour chart hints at decreasing buying interest. The pair remains above a mildly bullish 20 SMA, which provided intraday support, although the longer moving averages stay well above the current level, with the 100 SMA gaining bearish traction. At the same time, the Momentum indicator turned south within neutral levels, while the RSI indicator is currently flat at around 54. The aforementioned 20 SMA stands at around 0.9980, the level to break to confirm a near-term bearish continuation. Support levels: 0.9980 0.9940 0.9895 Resistance levels: 1.0030 1.0080 1.0120 View Live Chart for the EUR/USD

Key highlights EUR/USD failed to recover above the parity level and declined. It broke a key rising channel with support at 0.9940 on the 4-hours chart. EUR/USD technical analysis Looking at the 4-hours chart, the pair settled below the 1.0050 level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours). Recently, it saw a minor upward move above the 1.0000 resistance zone. However, the bears were active near the 1.0080 level. It failed to clear the 38.2% Fib retracement level of the downward move from the 1.0368 swing high to 0.9902 low. It started a fresh decline below the 1.0000 support. There was a break below a key rising channel with support at 0.9940 on the same chart. The pair is now approaching the 0.9900 support zone. If there is a downside break below the 0.9900 support, the pair could decline towards the 0.9850 support. Any more losses might call for a move towards 0.9720. Conversely, the pair might rise again above 0.9950. On the upside, the pair is facing resistance near the 1.0000 level. The next major resistance is near the 1.0080 level. A clear move above the 1.0080 resistance might send the pair higher towards the 1.0120 level or the 100 simple moving average (red, 4-hours).