EUR/USD: Bears push harder and target 1.0200
|- EUR/USD remains well under pressure near 1.0230.
- The greenback flirts with recent cycle peaks.
- Germany Factory Orders expanded 0.1% MoM in May.
The selling bias around the single currency remains unabated and now drags EUR/USD to fresh lows near 1.0230, an area last seen back in December 2002.
EUR/USD weighed down by recession talks, USD-buying
EUR/USD retreats for the fourth consecutive session so far on Wednesday amidst increasing downside pressure, all against the backdrop of unabated market chatter around a probable recession in the euro area and the US in the next months.
In addition, the uncertainty around the ECB’s de-fragmentation tool remains on the rise, as the central bank has so far failed to provide markets with any concrete hint other than wishful thinking from policymakers.
Another downtick in German 10y Bund yields accompanies so far the daily pullback in spot, this time dropping to multi-week lows near 1.15%.
In the German calendar, Factory Orders expanded at a monthly 0.1% in May and the Construction PMI improved a little to 45.9 (from 45.4) in June. In the broader Euroland, Retail Sales expanded 0.2% in the year to May.
Across the ocean, the ISM Non-Manufacturing will be in the limelight later in the NA session followed by the release of the FOMC Minutes of the June 15 gathering.
What to look for around EUR
Bears maintain the EUR/USD under heavy pressure and the acceleration of the downside opens the door to a probable visit to the 1.0200 neighbourhood sooner rather than later.
Indeed, the pair’s price action remains depressed and keeps closely following rising speculation around a probable recession in the region, dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence.
Key events in the euro area this week: Germany Factory Orders, Construction PMI, EMU Retail Sales (Wednesday) – ECB Accounts (Thursday) – ECB Lagarde (Friday).
Eminent issues on the back boiler: Fragmentation risks. Kickstart of the ECB hiking cycle in July? Asymmetric economic recovery post-pandemic in the euro bloc. Impact of the war in Ukraine on the region’s growth prospects and inflation.
EUR/USD levels to watch
So far, spot is retreating 0.30% at 1.0234 and faces the next support at 1.0225 (2022 low July 6) seconded by 1.0200 (round level) and finally 1.0060 (low December 11 2002). On the other hand, a breakout of 1.0563 (55-day SMA) would target 1.0615 (weekly high June 27) en route to 1.0773 (monthly high June 9).
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