- EUR/USD fades bounce off yearly low, pressured around intraday bottom of late.
- Market sentiment worsens over Evergrande news, doubts over US stimulus.
- DXY tracks US Treasury yields to kick-start the NFP week.
- US Factory Orders, risk catalysts will be eyed amid off in China.
EUR/USD reverses early Asian gains, not to forget Friday’s rebound from yearly low, while refreshing intraday low around 1.1590 heading into Monday’s European session.
The major pair cheered upbeat EU data and risk-on mood to trigger the prior corrective pullback. However, a shift in the market sentiment seems to have recently weighed on the quote amid a quiet start to the key week.
The risk aversion wave takes clues from China as Evergrande shares get suspended from trading in Hong Kong. However, news that an investor will acquire a 51% stake in the troubled firm’s management unit test the bears amid a week-long vacation in China.
Also challenging the market sentiment are the weekend comments from the US condemning ‘provocative’ Chinese activities near Taiwan and the CNBC news, relying on sources, which said, “US Trade Representative Katherine Tai will announce that China hasn’t complied with the phase one trade deal during her speech on Monday.”
It’s worth noting that the hopes of US stimulus, as backed by President Joe Biden and House Speaker Nancy Pelosi joins expectations that Beijing will limit the negative fallout of the Evergrande’s default to challenge the market pessimism.
Against this backdrop, S&P 500 Futures refresh intraday low near 4,335, down 0.20% on a day, whereas the US 10-year Treasury yields regain 1.47% by the press time.
As the risk-off mood underpins the US dollar’s safe-haven demand, the US Dollar Index (DXY) pauses after a two-day pullback from the yearly top near 94.07.
It should be observed that Friday’s upbeat Eurozone PMIs and Inflation figures joined month-start consolidation to help the EUR/USD recover from the yearly low. However, the market sentiment remains sour and hence favors the bears to aim for the 1.1562 level.
Even so, US Factory Orders for August, expected 0.9% versus 0.4%, will join the risk catalysts mentioned above to entertain the EUR/USD traders ahead of the key US Nonfarm Payrolls (NFP), up for publishing on Friday.
Technical analysis
Unless crossing a descending support-turned-resistance line from April, near 1.1650, EUR/USD remains directed towards the yearly low near 1.1560. However, the early 2020 tops close to 1.1500 may challenge the pair sellers afterward.
