EUR/USD eyes 1.0200 as risk aversion underpins the US Dollar
- EUR/USD holds lower ground near one-week low after breaking a fortnight-old support line.
- Hawkish comments from the ECB policymakers battled softer German PPI to favor confuse traders.
- Worsening Covid conditions in China, indecision over Fed’s next move and US data favored the US Dollar.
- Risk catalysts are the key ahead of Wednesday’s key data, FOMC Minutes.
EUR/USD struggles around mid-1.0200s after breaking a short-term key support during three-day downtrend in the last. The pair bears take a breather around a one-week low amid a lack of major data/events during Tuesday’s Asian session but broad US Dollar demand and breaking of the previously important support keeps sellers hopeful.
That said, the US Dollar Index (DXY) rose the most in November the previous day as market’s sentiment soured amid fresh fears of the Coronavirus. Adding strength to the greenback’s safe haven demand were mixed signals from Eurozone data and the European Central Bank (ECB) policymakers. Furthermore, anxiety ahead of this week’s preliminary readings of the monthly activity data and the Federal Open Market Committee (FOMC) Meeting Minutes.
China reported a jump in the daily Covid cases and two virus-led deaths on Monday, which in turn raised doubts on the Chinese government’s easing of activity controls. The same renews the virus woes that drowned global markets previously.
Elsewhere, ECB Chief Economist Philip Lane favored further rate hikes and expected the likely recession to be short-lived. On the same line, Government Council member Robert Holzmann favored 75 basis points (bps) of rate hike for December whereas policymaker Mario Centeno raised doubts on such a move.
It should be noted that Cleveland Federal Reserve (Fed) Bank President Loretta Mester appeared less hawkish whereas the previous US data raised expectations of a 75 bps move from the Fed and favored the US Dollar bulls.
Elsewhere, the Chicago Fed National Activity Index fell to -0.05 compared to 0.17 prior whereas Germany’s Producer Price Index (PPI) for October eased to 34.5% versus 41.5 expected and 45.8% prior.
Amid these plays, Wall Street closed in the red and the US Treasury yields were firmer too, which in turn favored the US Dollar buyers and weigh on the EUR/USD prices.
Moving on, Eurozone Consumer Confidence for November, expected -26 versus -27.6 prior will be important for fresh impulse but major attention should be given to the risk catalysts ahead of a busy Wednesday.
Technical analysis
A clear downside break of a two-week-old ascending trend line and the 10-Day Moving Average (DMA), currently around 1.0285, directs EUR/USD bears towards September’s peak surrounding 1.0200.