EUR/USD comes under pressure and threatens 1.0200

  • EUR/USD’s upside momentum falters ahead of the 1.0300 mark.
  • The dollar looks bid amidst renewed risk-off sentiment.
  • German 10y Bund yields drop to new 4-month lows near 0.70%.

Sellers now drag EUR/USD back to the 1.0230 region following an earlier bull run to the area just below 1.0300 the figure on Tuesday.

EUR/USD weaker on USD-buying

EUR/USD now trades on the defensive for the first time after four consecutive daily advances and following an unsuccessful attempt to retest the 1.0300 mark earlier in the session.

The re-emergence of the risk aversion lends support to the greenback and encourages the US Dollar Index (DXY) to make a U-turn and return to the positive territory following 4-week lows in the vicinity of the 105.00 yardstick.

The pair’s corrective move comes in tandem with the relentless downtrend in the German 10y Bund yields, this time retreating to levels last seen back in mid-April around the 0.68% zone.

In the domestic calendar, the Unemployment Change in Spain increased by 3.230K persons in July following June’s marked drop. Still in Spain, the Consumer Confidence gauge for the month of July is due later.

What to look for around EUR

EUR/USD’s rebound came short of the 1.0300 region so far on Tuesday amidst a moderate recovery in the greenback, which appears in turn propped up by the re-emergence of the risk aversion.

Price action around the European currency, in the meantime, is expected to closely follow dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence.

On the negatives for the single currency emerges the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment readings among investors and the renewed downtrend in some fundamentals.

Key events in the euro area this week: Germany Balance of Trade, Final Services PMI (Wednesday) – Germany Construction PMI (Thursday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections in late September. Fragmentation risks amidst the ECB’s normalization of monetary conditions. Impact of the war in Ukraine on the region’s growth prospects and inflation.

EUR/USD levels to watch

So far, spot is retreating 0.20% at 1.0240 and faces the next support at 1.0096 (weekly low July 26) seconded by 1.0000 (psychological level) and finally 0.9952 (2022 low July 14). On the upside, a breakout of 1.0293 (monthly high August 2) would target 1.0423 (55-day SMA) en route to 1.0615 (weekly high June 27).

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