As bears remain in control for the time being, the common currency remains vulnerable to even deeper losses
Global stock markets began the week on a negative note, with risk aversion pushing the safe-haven dollar higher on Monday. The USD index surged to fresh twenty-year highs beyond 104.00 before retreating slightly. The buck climbed to 104.20 for the first time since December 2002 as US 10-year Treasury yields rose to a fresh top at 3.15%.
The risk-off tone dominates markets amid persistent worries about inflation, rates, economy, and geopolitics. Adding to a more cautious sentiment, Shanghai tightened COVID restrictions even as cases dropped to a six-week low. Also, market players continue to digest Friday’s Nonfarm Payrolls figures that exceeded expectations. As such, the solid health of the country’s jobs market in combination with rising US yields underpinned the buoyed mood surrounding the buck.
Against this backdrop, EURUSD briefly dipped below the 1.0500 mark earlier in the day and kept flirting around this threshold during the European hours, shedding 0.40% on the day. As bears remain in control for the time being, the common currency remains vulnerable to even deeper losses despite the oversold conditions. Extra weakness in the pair comes amidst fresh economic data out of the Eurozone. The Sentix investor confidence index deteriorated to -22.6 for the month of May from -18 in April versus -20.8 expected.
The immediate support now arrives at 1.0470. Failure to hold above this zone would pave the way towards 2017 lows around 1.0340. Meanwhile, the USD index could settle above 104.00 on a daily closing basis to extend the ascent in the coming days should risk aversion continue to persist amid lingering worries about global recession.