The greenback will stay elevated, with the downside potential looking limited
The dollar stays under pressure on Monday, struggling to regain a steady upside momentum after the recent correction from long-term peaks registered around 99.40 last week. The greenback has settled below 99.00, threatening the 98.80 immediate support zone during the European hours.
Still, as investor attention remains on the Russia-Ukraine conflict, the overall bullish trend for the US currency remains intact. Amid the lack of any progress towards a diplomatic solution of the Russia-Ukraine military conflict, one could expect the greenback to stay elevated, with the downside potential looking limited at this stage as uncertainty surrounding the developments in Ukraine remains high.
Also supportive of the stronger dollar appear the solid performance of the US economy as well as the start of the Fed’s normalization of its monetary conditions. The USD could derive support from the Wednesday’s FOMC event, where central bank is widely expected to hike the rate by 25 bps.
As such, the euro could hit fresh long-term lows in the coming days, especially as the common currency failed to hold above the 1.1100 figure during the bounce witnessed last week. EURUSD turned positive on Monday while staying below 1.1000 ahead of the North American trading session. Despite some improvement in the short-term technical picture, the euro stays just mildly above May 2020 lows and could threaten the 1.0800 threshold this week.
On the upside, the EURUSD pair needs to clear at least the 1.1000 figure on a daily closing basis in order to continue recovery attempts. Meanwhile, the key upside target now arrives at 1.1145 where the descending 20-DMA lies. However, it looks like the euro will hardly be able to regain this zone anytime soon.