EUR/USD licks its wounds at 20-year low under 1.0300, Fed Minutes, US ISM Services PMI eyed
- EUR/USD bears take a breather around the lowest levels since December 2020 after the biggest daily slump in 28 months.
- Recession fears joined upbeat US data to offer warm welcome to the USD after a long weekend.
- Yields dropped to five-week low, equities dwindled as well.
- EU Commission’s economic forecasts, Eurozone Retail Sales are extra catalysts to watch for fresh impulse.
EUR/USD moves stabilize near the lowest levels in two decades after falling the most since March 2020, as bears await fresh clues to extend the fierce south-run. In addition to the anxiety ahead of the key data/events, the initial hours of the Asian trading session also restrict the pair’s moves around 1.0370-60 on Wednesday.
Be it Germany’s energy crisis or Italy’s drought, not forgetting the bank of England’s grim economic outlook, everything contributed to the pessimism surrounding the economic conditions in the old continent. Adding to the downside pressure was the hawkish bias of the European Central Bank (ECB) policymakers, which in turn suggested aggressive central bank action and further strain on the bloc.
While the EUR struggled due to the economic fears, the US dollar was equally cheering the same as the US Dollar Index (DXY) rallied to the highest levels in two years as the US traders returned from the long weekend. In addition to the rush for risk safety, the DXY also benefited from the better-than-forecast US Factory Orders for May, to 1.6% MoM versus 0.5% expected and upwardly revised 0.7% previous readings.
On the other hand, an improvement in the final readings of the Eurozone’s S&P Global PMIs couldn’t help the bloc’s currency as German Economy Minister Robert Habeck hints at more pain due to the energy crisis. Further, the German Retail Association also blamed rising inflation and energy costs and poor consumer sentiment for the outlook.
Amid these plays, the equities dropped, before a mild recovery, whereas the US Treasury yields refreshed one-month low while inverting the yield curve between the two-year and 10-year coupons.
Moving on, European Commission’s economic forecasts and Eurozone Retail Sales for May will offer immediate directions ahead of the Federal Open Market Committee (FOMC) Minutes and the US ISM Services PMI for June.
Also read: FOMC June Minutes Preview: Opportunity for dollar correction?
Technical analysis
A clear downside break of the horizontal area comprising the yearly low, around 1.0360-50, keeps EUR/USD bears hopeful of extending the south-run towards the 1.0000 psychological magnet.