The next bearish target could be seen at the 0.9900 psychological level
The euro fell back to parity for the first time in more than a month as the USD keeps advancing north across the board. The greenback has been rallying for the ninth session in a row on Monday, deriving support from renewed expectations for more aggressive tightening by the Federal Reserve after recent hawkish tone from the central bank’s speakers on the opinions regarding the size of a rate hike next month.
Renewed risk aversion across the financial markets also plays into the safe-haven dollar’s hands. Following mixed-to-negative trades in Asia, European stocks opened lower at the start of the week as risk sentiment was dampened by hawkish comments from Bundesbank President who said that that the ECB must continue hiking interest rates even as recession risks in Germany grow.
Against this backdrop, the shared currency dipped below parity to find some support around 0.9988 before bouncing slightly in recent trading. The pair is trying to regain the 1.00 mark during the European hours, but downside risks continue to persist while the recovery potential looks limited.
Should the downside pressure intensify anytime soon, the pair may target the 0.9950 zone that capped the sell-off last month. In case this region fails, the next bearish target could be seen at the 0.9900 psychological level. On the upside, the nearest resistance now arrives at 1.0050, followed by the 1.0085 zone and the 1.0140.
Now, investors are looking ahead to the Federal Reserve’s annual Jackson Hole conference in Wyoming due this week. Investor sentiment shows they expect the Fed’s Jackson Hole meeting to bring a hawkish message. As such, risk aversion is likely to continue in the days to come, thus pressuring the high-yielding euro.