EUR/USD drops to fresh session lows, farther below 1.1600 handle
| • Trade-related headline trigger risk-aversion trade and drive safe-haven flows.
• An uptick in the US bond yields further boost USD and exert additional pressure.
The EUR/USD pair faded a bullish spike to an intraday high level of 1.1644 and refreshed session lows in the last hour.
The pair's sharp retracement of around 70-pips could be attributed to a sudden pickup in the US Dollar demand, especially after the latest trade-related headlines. According to the WTO meeting agenda, China has asked for authorization to impose trade sanctions on the US and the news triggered a typical global risk aversion trade.
A turnaround in the risk sentiment was evident from a sharp retracement across European equity markets and was eventually seen benefitting the greenback's safe-haven status against its European counterpart. This coupled with a goodish uptick in the US Treasury bond yields provided an additional boost to the buck and further collaborated to the pair's steep decline to a session low level of 1.1575.
It would now be interesting to see if the pair is able to find any buying interest at lower levels or the current pull-back marks the resumption of the prior depreciating move, though would be confirmed only once the 1.1530-25 important horizontal support is decisively taken out.
Technical levels to watch
A follow-through selling below 1.1570 level has the potential to drag the pair back towards overnight swing lows support, around the 1.1525 level, below which the downfall is likely to accelerate further towards the key 1.1500 psychological mark.
On the flip side, momentum back above the 1.1600 handle now seems to confront some heavy supply near the 1.1630-35 region, which if cleared is likely to trigger a short-covering move and lift the pair towards reclaiming the 1.1700 round figure mark.
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