Daily Analysis EURUSD - 8 September 2023

The USD Index (DXY), which measures the US Dollar against various currencies, has retreated from its highest level since March 9. This pullback is driven by profit-taking among bullish traders ahead of the China inflation data and G20 leaders’ summit this weekend. Additionally, declining US Treasury bond yields and improved stability in equity markets have weakened the safe-haven appeal of the dollar, benefiting the EUR/USD pair. However, expectations of the Federal Reserve (Fed) tightening policy further should support US bond yields and the USD.

Market sentiment suggests the possibility of another 25-bps rate hike by year-end, with the Fed expected to maintain higher interest rates. Recent data, such as the lower-than-expected US Weekly Initial Jobless Claims and positive US ISM Services PMI, reinforce the view of a resilient US economy, allowing the Fed to remain hawkish. In contrast, the European Central Bank (ECB) lacks clarity on rate hikes.

Differing ECB opinions, like Peter Kazimir's support for a September rate hike and Ignazio Visco's caution, could limit significant EUR/USD gains.  German inflation in August eased to 6.4%, as reported by the federal statistics office, confirming preliminary data.

EURUSD is close to the 1.0650 support level, while the DXY 105.50 target seems achievable. The Dollar retreated marginally yesterday, but the bullish trend remains intact.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1090	1.1050	1.1000	1.0700	1.0650	1.0600