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Market News Wednesday's Doji and the ECB Economic Bulletin entice buyers below 1.0200

Wednesday's Doji and the ECB Economic Bulletin entice buyers below 1.0200

After printing a bullish Doji at the weekly bottom, the EUR/USD pair has remained stagnant. Initial indications from the ECB's monthly Economic Bulletin have been positive. The US currency suffers with contradictory data and Fed commentary preceding NFP. German Factory Orders, second-tier US statistics, and Taiwanese news are also vital for generating new momentum.

Alina Haynes
2022-08-04
552

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During Thursday's mid-Asian session, the EUR/USD becomes intriguing as bids rise to 1.0165, validating Wednesday's bullish Doji. Nonetheless, investors of the pair seek confirmation from rates that have lately softened and optimism from the monthly ECB Economic Bulletin.

 

Nevertheless, the main currency pair retested its weekly low the day prior before rebounding from 1.0122 to equal the day's starting levels and printing a bullish Doji candlestick. In doing so, the quotation tracked the movements of the US dollar and the mixed concerns surrounding the gas issue in the EU, not to mention lackluster statistics, before to Friday's crucial US Nonfarm Payrolls report (NFP).

 

The US Dollar Index (DXY) remained uncertain at 106.35 after reaching a new weekly high of 106.82 on Wednesday.

 

Initially, the US-China rivalry over Taiwan, as well as worse Eurozone Retail Sales and stronger US PMIs, boosted the greenback's index. However, stronger equities and a better-than-expected China PMI appeared to have joined pre-NFP angst in pressuring the DXY bulls. The news reported by Bloomberg is also a source of optimism for EUR/USD purchasers.

 

The European Central Bank (ECB) stated in a Tuesday pre-release of its economic bulletin reported by Bloomberg that the fiscal support offered to euro area economies during the Russia-Ukraine conflict is increasing the bloc's GDP while temporarily decreasing inflation.

 

In June, Retail Sales in the Eurozone decreased by 1.2% compared to 0% predicted and 0.4% in May, while the US ISM Services PMI for July jumped to 56.7 from 55.3 before and the market forecast of 53.5. In addition, the final reading of the US S&P Global Services PMI for July fell to 47.3, the first decline in two years, from 52.7 in June and 47 in the preliminary estimate. Elsewhere, China's Caixin Services PMI for the month of July also shocked the market with positive readings.

 

Noting that Fed officials have been predominantly hawkish recently and challenging EUR/USD bulls is important. James Bullard, president of the Federal Reserve Bank of St. Louis, stated, "We still have a ways to go before we reach a restrictive monetary policy." The policymaker adds that he still hopes to reach between 3.75 and 4 percent this year, while expressing a preference for frontloading. In addition to Bullard, Fed Minneapolis President Neel Kashkari and Richmond Fed President Thomas Barkin joined the Fed hawks in exerting negative pressure. Mary Daly, president of the Federal Reserve Bank of San Francisco, seems to have sent contradictory signals, which subsequently tempered the DXY bulls. The policymaker stated, "Next year's rate reduction are anticipated too soon by the markets."

 

Wall Street benchmarks finished with substantial gains, although S&P 500 Futures record slight losses at the latest. In addition, 10-year US Treasury rates continue under pressure at around 2.71 percent, three basis points (bps) lower at press time.

 

Germany's Factory Orders for June will precede the US Good and Services Trade Balance for June, projected to be $-80.1B compared to $-85.5B previously, and the weekly Initial Jobless Claims, forecast to be 259K compared to 256K previously. Prior to Friday's NFP report, however, the statements from the ECB and the Fed governors, as well as the Sino-American conflict over Taiwan, will garner the most attention.

 

Prior reaching the 1.0200 level, a convergence of the prior support line from mid-July and the 10-DMA around 1.0195 would limit the EUR/short-term USD's rebound. In the meanwhile, the 21-DMA and Doji's low, located around 1.0155 and 1.0120, respectively, might present a challenge to intraday sellers.


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