EUR/USD drops below 1.1050, to lowest since May 2020

The EUR/USD fell to 1.1046, reaching the lowest level since May 2020. It is hovering around 1.1050, falling for the third consecutive day. The euro and the pound remain under pressure versus the US dollar which gained momentum during the last hour as stocks in the US turned negative.

The S&P 500 is down 0.35% after a positive opening. The reversal took place during the last hour. The cautious tone across markets remains in place as Russian troops continue to attack Ukraine. Reports mentioned US President Biden is ready to impose sanctions on a number or Russian oligarchs.

Economic data released on Thursday came in mixed in the US. Initial Jobless Claims dropped to eight-week lows at 215K. Unit Labor Costs was revised higher from 0.3% to 0.9% in Q4. The ISM PMI Service sector fell unexpectedly from 59.9 to 56.5. Factory Orders rose in January 1.4% (above the 0.7% of market consensus). On Friday, the NFP report is due.

Inflation numbers continue to rise in the Eurozone with the Producer Price Index in January reaching 30% (annual). The European Central Bank (ECB) minutes from the February meeting showed members willing to begin removing monetary stimulus. Next week, it is the board meeting. “Amidst all the uncertainty, we expect the ECB to opt for flexibility by deciding to accelerate the taper of its asset purchases and remove the link between the end of net purchases and the first rate hike”, explained analysts at Nordea.

Short-term outlook

The EUR/USD remains under pressure, under 1.1050, the next support could be seen at 1.1025/30, before the psychological area of 1.1000. A recovery back above 1.1070 would alleviate the bearish pressure. Above the next resistance stands at 1.1105/10.

Technical levels