The USD index keeps climbing despite the persistent downside pressure in US yields
The euro plunged to fresh early-April lows on Monday as risk aversion across the financial markets pushed the safe-haven dollar higher across the board. The quick spread of the Delta variant of the coronavirus across the world continues to weigh on the global growth prospects and thus underpins the risk-off tone. As a reminder, last week, a number of European countries including France, Greece, and Spain announced new restrictions in a bid to curb a rise in infections in the region.
On the data front, Eurozone’s construction output came in at 0.9% in May versus -2.2% m/m prior. However, the report did little to ease the selling pressure surrounding the common currency. The EURUSD pair dipped to the 1.1765 area before bouncing slightly in recent trading. The prices could now target the 1.1740 area if the pressure persists in the short term.
The USD index keeps climbing despite the persistent downside pressure in US yields, with the 10-year note hovering around 1.25% for the time being. Also, USD bulls continue to cheer Friday’s US retail sales report which demonstrated that the pace of the US recovery remains solid.
The common currency could stay on the defensive these days and even see deeper losses in the second half of the week if the ECB reaffirms or even intensifies its dovish stance at the upcoming meeting due on Thursday.
From the technical point of view, EURUSD may witness a slight bounce in the short term, with the RSI on the hourly charts correcting higher from the oversold territory. However, as the daily RSI continues to point lower but is yet to enter the oversold conditions, it looks like there is room for further losses at this stage. On the upside, the immediate resistance is now represented by the 1.1800 figure.