Euro Set To See Deeper Losses With 2020 Lows In Sight

Euro Set To See Deeper Losses With 2020 Lows In Sight

Risk-off trades dominate global financial markets at the start of a new trading week as resurgent concerns over Chinese lockdowns make investors nervous about the outlook for the world’s second-largest economy, with geopolitics adding to market worries.

European equity markets trimmed some losses after a sharp drop in early deals, but major regional benchmarks were still losing more than 1% ahead of the opening bell on Wall Street. US stock index futures managed to pare early losses as well, suggesting risky assets could receive some respite from a solid sell-off.

Risk aversion pushed the safe-haven US dollar north across the market on Monday. The USD index jumped to March 2020 highs around 101.75 earlier before shifting into consolidation mode around slightly lower levels.

However, it looks like dollar bulls took a brief pause before another attack that will bring the price closer to the 102.00 mark, followed by the 2020 peak of 103.00. Anyway, the buck would stay elevated in the near term as traders start to shift focus towards the Fed meeting due next week.

Against this backdrop, EUR/USD suffered another steep decline towards fresh long-term lows registered just above the 1.0700 handle that capped the downside pressure earlier in the day.

Still, the common currency stays only slightly above the lower end of the extended trading range, implying the pair is yet to find a bottom before a reversal occurs. Now, the market focus shifts to the 2020 low of 1.0635. On the upside, the immediate resistance arrives at 1.0760.

The euro is now pressured by a stronger dollar, risk-off trades, geopolitical uncertainty, hawkish Fed, concerns over energy security in the EU, and rising economic worries in the region. Also, traders express concerns over French politics amid a fractured electorate. In other words, the euro is unlikely to see significant gains in the near term. 



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