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EUR/USD hovers around 1.0057 after reaching new week highs

  • EUR/USD advances sharply ahead of US NFP and next week’s ECB monetary policy decision.
  • Cleveland’s Fed Mester expects Fed funds rates above 4% and would like to hold them higher for longer.
  • ECB’s hawks expect at least a 50 bps increase at September 8 meeting.
  • Money market futures estimate the ECB would hike 125 bps by October.

EUR/USD is recording decent gains in the North American session amidst a risk-off mood, courtesy of further hawkish Fed commentary, with Cleveland’s Fed Mester taking the stand. At the same time, month-end flows weighed on the greenback.

The EUR/USD opened near parity before sliding towards the day’s lows at 0.9971 before climbing sharply, reaching a daily high at 1.0076 on month-end flows. At the time of writing, the EUR/USD is trading at 1.0059, above its opening price.

During the New York session, Cleveland’s Fed President Loretta Mester emphasized that rates in the US need to be above 4% by 2023 and reiterated the Fed needs to “hold it there.” Mester added that she does not foresee rate cuts in 2023 while acknowledging that even though recession fears had risen, they are not part of her baseline.

In the meantime, the US economic docket featured the US ADP August’s figures, the first one, after pausing due to changes made to the report. Private hirings rose by 132K less than July’s 270K. Later, the Chicago PMI for August increased more than estimated, topping 52.2 vs. 52 expected by analysts.

In the meantime, the Euro area energy crisis continues to worsen. The Nordstream 1 pipeline entered three-day maintenance, as reported by Gazprom, keeping investors uneasy amid a period of high energy prices. In the meantime, EU’s inflation rose 9.1% YoY, higher than estimates, while core readings, which extract volatile items, also rose 4.3%.

Last reports about the Nordstream 1, Gazprom commented that Siemens could not hold regular equipment maintenance for the pipeline via Interfax. The natural gas pipeline works at a 20% capacity.

Elsewhere, ECB’s hawks are all over the place, crossing wires. The first one was Rehn, which expressed that although the economic outlook has darkened, monetary policy needs to normalize. He foresees further rate hikes coming. Later ECB’s Holtzmann commented that 50 bps is the minimum for September while adding that 75 bps need to be thrown into discussions.

What to watch

The euro area economic calendar will reveal German Retail Sales, amongst a tranche of S&P Global Manufacturing PMIs readings. On the US front, the docket will feature unemployment claims, the S&P Global PMI, and, most importantly, the ISM Manufacturing PMI.

EUR/USD Key Technical Levels

EUR/USD

Overview
Today last price1.0059
Today Daily Change0.0044
Today Daily Change %0.44
Today daily open1.0015
 
Trends
Daily SMA201.0117
Daily SMA501.0206
Daily SMA1001.0414
Daily SMA2001.0815
 
Levels
Previous Daily High1.0055
Previous Daily Low0.9982
Previous Weekly High1.009
Previous Weekly Low0.9901
Previous Monthly High1.0486
Previous Monthly Low0.9952
Daily Fibonacci 38.2%1.0027
Daily Fibonacci 61.8%1.001
Daily Pivot Point S10.998
Daily Pivot Point S20.9944
Daily Pivot Point S30.9907
Daily Pivot Point R11.0052
Daily Pivot Point R21.009
Daily Pivot Point R31.0125

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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