EUR/USD remains at 1.0750 amid risk aversion

• EUR/USD hit new yearly lows just above 1.0700 on Monday as risk aversion inflows saw the dollar strengthen across the board.
• Ahead of a busy week of US and Eurozone GDP and inflation data, bears continue to target 2020 lows.

The EUR/USD has stabilized at fresh yearly lows just above the 1.0700 level in early US trading on Monday as the US dollar gains broadly amid the clearly risk-off tone in market trade in general. Currently trading at 1.0725, down around 0.7% on the day, which would mark the worst day for the pair since April 5, with losses on a similar scale as GBP/USD, but less severe than others. G10/USD majors more risk sensitive.

ECB sources quoted by Reuters over the weekend highlight the sense of urgency felt by many ECB policymakers to end net QE purchases as soon as possible and hint at the possibility of multiple rate hikes before the end of the year. since July or August that failed to raise the euro on Monday. As far as EUR/USD traders are concerned, the ECB’s hawkish shift in recent weeks towards a preference to end QE and the start of Q3 rate hikes has been offset by a shift in comparatively more hard line by the Federal Reserve.

That largely explains why EUR/USD has been able to sustain lasting rallies, with a backdrop of fragile risk appetite and elevated European geopolitical/economic risks associated with the Russo-Ukrainian war also weighing in. Eurozone and US GDP figures are due out later in the week and are unlikely to distract from the broader narratives mentioned above.

Of more interest will be US core PCE inflation data for March and preliminary Eurozone consumer price inflation figures for April, both of which are expected to show still-very-elevated levels of inflation that continue to argue for favor of monetary tightening by the Fed and the ECB. EUR/USD is likely to moderate any rally, with many short-term bears looking for the pair to test 2020 lows in the 1.0630 area sometime in the next few days/weeks.

Technical levels