• Euro adds to Monday’s retracement vs. the US Dollar.
• Stocks in Europe trade well on the defensive on Tuesday.
• EUR/USD revisits the 1.0970 zone on USD buying, China.
• The USD Index (DXY) maintains the upward bias above 102.00.
• Final Inflation figures in Germany matched advanced readings.

The Euro (EUR) continues to exhibit pessimism against the US Dollar (USD) at the start of the week, prompting a retreat of EUR/USD below the significant psychological barrier of 1.1000 on Tuesday.

The decline in the commodity is further fueled by negative indicators from China, which reveal a notable contraction in both exports and imports during July. This reinforces the belief that the Chinese economy has yet to experience a significant recovery.

Meanwhile, despite a decrease in US yields across the board, the Greenback manages to hold its ground above the 102.00 level when measured by the USD Index (DXY).

Within the European Central Bank's purview, the Consumer Expectation Survey indicates that inflation in the broader euro area is projected to be 2.3% in three years' time, down from 2.5%, and inflation over the next twelve months is expected to be 3.4%, down from 3.9%.

Turning to domestic matters, final inflation figures in Germany align with preliminary readings, with the Consumer Price Index (CPI) showing a year-on-year increase of 6.2% and a month-on-month increase of 0.3%.

Across the Atlantic, Philadelphia Fed President Patrick Harker, who holds hawkish views, will deliver a speech later in the session. Additionally, the session will see the release of the Balance of Trade results, Wholesale Inventories, the NFIB Business Optimism Index, and the IBD/TIPP Economic Optimism Index.

Daily digest market movers: Euro maintains the offered stance below 1.1000

• The EUR retests the 1.0970 zone vs. the USD on Tuesday.
• The USD Index (DXY) clings to gains above the 102.00 yardstick.
• The risk complex loses further momentum in the first half of the week.
• The ECB’s survey shows dwindling inflation pressures in the next few months.
• Chinese exports and imports contracted more than expected in July.
• CME Group’s FedWatch Tool sees no rate hikes by the Fed in H2 2023.
• Speculation that the Fed might have ended its hiking cycle remains steady.
• Investors’ attention remains on the US CPI due on August 11.

Technical Analysis: Euro risks extra losses below 1.1150

A more substantial recovery in EUR/USD continues to prove elusive at the moment, leading the pair to remain confined within the region below 1.1000.

The breach of the 1.0920 zone, where the monthly low and the interim 55-day and 100-day SMAs intersect, exposes EUR/USD to potential downside, potentially driving it towards the July low of 1.0833 (July 6). This move could precede a descent towards the significant 200-day SMA at 1.0754 ahead of the May low of 1.0635 (May 31). Further downward lies the March trough of 1.0516 (March 15), followed by the 2023 low at 1.0481 (January 6).

On a contrasting note, intermittent bullish attempts might prompt the pair to challenge the weekly pinnacle at 1.1149 (July 27) initially. Surpassing this level could alleviate some of the downward pressure, potentially motivating spot to explore the 2023 peak at 1.1275 (July 18). Once this threshold is surpassed, significant resistance levels become sparse until the 2022 peak at 1.1495 (February 10), closely shadowed by the round milestone of 1.1500.

Moreover, the optimistic perspective on EUR/USD remains intact as long as the pair remains above the pivotal 200-day SMA.