EUR/USD dribbles at multi-year low below 1.0200, ECB Minutes eyed

EUR/USD turned out to be the weakest among the G10 currency pairs on Wednesday before bears took a breather around the nearly 20-year low of 1.0161 during the initial hour of Thursday’s Asian session. Apart from the broad pessimism surrounding economic growth and central bankers’ aggression, the energy crisis in the bloc exerted additional downside pressure on the quote ahead of the key data/events.

Germany and Italy have already signaled early signs of economic slowdown, and the bloc’s Retail Sales also dropped to 0.2% in May versus 4.0% recorded in April and 5.4% estimated. Also on the negative side were chatters that the European Central Bank’s (ECB) crisis-fighting scheme risks being tied up in legal and political knots, per the Financial Times (FT), also weighing on the EUR/USD prices.

On the other hand, US ISM Services PMI for June dropped to 55.3 versus 55.9 in May. The actual figure, however, came in better than the market expectation of 54.5. It’s worth noting that the US JOLTS Job Opening for May declined to 11.25 million versus 11.00 million expected and 11.68 million prior.

While the softer US data initially allowed the bears to take a breather, the Federal Open Market Committee (FOMC) Minutes favored the pessimism as the Fed policymakers appear determined to announce another 75 basis points (bps) of a rate hike. That said, the latest Fed Minutes highlighted the need for the “restrictive stance of policy” while also saying, “even more restrictive stance could be appropriate if elevated inflation pressures were to persist”.

Elsewhere, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said, per Reuters, “Global economic outlook has 'darkened significantly' since last economic update.” the IMF chief also added, “Cannot rule out the possible global recession in 2023.”

Amid these plays, the US 10-year Treasury yields bounced off a three-week low to 2.93%, but the higher print of the 2-year bond coupon, around 2.99%, hints at the global recession fears.

Moving on, risk catalysts are likely to entertain EUR/USD traders ahead of the ECB Monetary Policy Meeting Accounts (mostly known as ECB Minutes).

Technical analysis

Having dropped below the key 1.0360-50 support zone comprising multiple lows marked since May, EUR/USD appears vulnerable to witness further downside towards the 78.6% Fibonacci Expansion (FE) of late March-May downside, near 1.0130. However, any further declines won’t hesitate to recall the 1.0000 psychological magnet back to the chart.