Should dip buyers reemerge, the pair may regain 1.0800, but downside risks continue to persist in a broader picture
In thin trading conditions on Easter Monday, the euro stays under pressure, with EURUSD trading back below the 1.0800 figure, threatening April 2020 lows seen last week. The pair seems to be ready to notch fresh long-term lows as USD bulls remain in control across the market amid persistent risk-off tone in the financial markets.
As geopolitical tensions continue to rise globally, while central banks continue to fight the elevated inflation, the safe-haven dollar demand could persist further, thus pressuring high-yielding assets including the euro. Furthermore, as the ECB’s tone was less hawkish than expected last week, the common currency will continue to suffer from monetary policy divergence as the Federal Reserve sounds more and more aggressive these days.
As such, EURUSD could derail the 1.0757 low to target fresh two-year lows around 1.0725, followed by the 1.0700 handle last seen in march 2020. Should dip buyers reemerge, however, the pair may regain the 1.0800 mark in the short term, but downside risks continue to persist as long as the prices stay below at least the 200-week SMA, currently at 1.1450, that capped gains in mid-2021. On the upside, the immediate significant resistance now arrives at 1.0945, where the 20-DMA lies.
Late last week, the USD index derived support from the 100.00 psychological level to finish around 100.50. On Monday, the greenback has settled around 100.70 and could refresh two-year highs, targeting the 101.00 next barrier as the buying interest surrounding the buck remains unabated amid rising geopolitical tensions surrounding Ukraine. Also, the safe-haven US currency derives support from risks of a global recession amid stubbornly high inflation and supply chain disruptions across the globe.