The Dollar is again in the driver’s seat in trading today as traders continue to weigh recession risks and the outlook for the Fed in general. The latter was front and center last week amid slightly weaker US CPI data, but we’ve seen the reaction completely fade now that the greenback is regaining the upper hand.
As it is, it looks like the bond market is right again and FX is following suit as such. The Dollar has traded against the Euro from its 61.8 Fib retracement level at 1.0361 to 1.0130 currently. The latest pullback is a blow to the euro as it was targeting a breakout, and it illustrates how bad sentiment is for the single currency.
It’s hard to find any reason to like the euro as the economic outlook remains rather bleak. At this point, the ECB has only delivered a 50 basis point rate hike yet and it already looks like their window to offer another one is closing.
The Eurozone economy appears to have deteriorated sharply in July and with a looming energy crisis set to grip the region over the winter months, it is difficult to be optimistic towards the end of the year. year.
As for the EUR/USD, the next key level to watch will be the short-term support near 1.0100 and if that breaks, the pair will beckon the pair again. And this time it may not just be a flash in the pan below the key psychological level.