- EUR/USD reversed the initial rise to around 0.9990.
- The dollar rises and registers new highs of the cycle.
- US ISM non-manufacturing remains relevant on the docket.
After briefly testing the 0.9990 zone, the EUR/USD triggered a downward correction and fell near 0.9860, marking new 20-year lows.
EUR/USD could revisit 2022 low
EUR/USD now adds to the negative start to the week on Monday and revisits the area below 0.9900 after the sharp change in direction of the USD, which lifts the US Dollar Index (DXY) to new highs near 110.30, an area where it last traded in December 2002.
The pair’s daily decline comes on the heels of rising US and German yields as US investors return to their desks after Monday’s Labor Day inactivity.
Earlier on the euro docket, Germany’s construction PMI fell to 42.6 in August (from 43.7). On the US calendar, ISM non-manufacturing surprised to the upside, coming in at 56.9 in August.
What to watch out for around the EUR
The EUR/USD pair failed to ignite a lasting bullish attempt and once again succumbed to the relentless dollar rally.
So far, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns, fragmentation fears and the divergence between the Fed and the ECB. The latter, meanwhile, closely follows the prevailing debate about the magnitude of the next interest rate hikes by both the ECB and the Federal Reserve.
Among the negative aspects for the single currency are the growing speculations about a possible recession in the region, which seem to be underpinned by the decline in sentiment indicators and the incipient slowdown in some fundamental indicators.
Technical levels
For now, the pair is down 0.52% at 0.9876 and a break of 0.9874 (Sep 5, 2022 low) would target 0.9859 (Dec 2002 low) on the way to 0.9685 (Oct 2002 low). On the other hand, the next upside barrier comes in at 1.0090 (26 Aug weekly high), ahead of 1.0182 (55-day SMA) and after 1.0202 (17 Aug high).
Source: Fx Street
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