- EUR / USD is still on track to close the lateralized day.
- The US dollar index lost its momentum amid falling bond yields.
- The flight to safety continues to dominate financial markets at the start of the week.
The pair EUR/USD It started the new week under modest downward pressure and fell to its lowest level in more than three weeks at 1.1700. With the dollar struggling to preserve its strength in the second half of the day, the pair managed to erase its losses and was last seen trading flat on the day at 1.1725.
The risk-off market environment, as reflected in the sharp losses seen in major global stock indices due to the Evergrande crisis, helped the USD outperform its rivals on Monday. However, the sharp drop in US Treasury yields limited the rise of the US Dollar Index (DXY) and allowed the EUR / USD to rally during the US session. Currently, the benchmark 10-year US Treasury yield is down 4.7% on the day and the DXY is unchanged at 92.36. Meanwhile, the S&P 500 Index is losing 2.4%.
No high-level macroeconomic data will be published on the European economic agenda on Tuesday. Later in the day, August new homes in the US will be seen to give new momentum, but the perception of risk is likely to remain the main driver of the USD valuation.
EUR / USD short-term outlook
Analysts at Credit Suisse believe that EUR / USD could extend its slide with a close below 1.1695.
“Key support remains at the 38.2% retracement of the 2020/2021 uptrend at 1.1695, a clear and closing break below which (ideally weekly) should confirm a major top,” the analysts explained. “Assuming we then also see it decline from the August low at 1.1663, which would be our base case. We would look for a more significant downside with support seen below at 1.1612 / 04 and eventually back at 1.1495 / 93.”
Technical levels
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