HelenRush

The greenback profits on investor panic

FX:EURUSD   Euro / U.S. Dollar
Despite currency markets have been calmly observing the global stocks rout, the greenback managed to gain some support amid a widespread risk aversion this week. As a result, the euro is on the way to registers its worst weekly performance since October. Following a seven-week rally, EURUSD has retreated from highs above 1.25 hitting levels last seen back in mid-January around 1.22.
The overall sentiment around the USD remains bearish , and the currency’s positions are still fragile. For now, demand for the greenback is fuelled on the back of global equities plunge, as well as rising 10-year Treasury yields which may soon reach the 3% threshold. These are the key local factors preventing EURUSD from resuming the steady ascend, while the euro area fundamentals continue to support the EUR’s underlying bullish trend .
Therefore, as soon as panic in the world stock exchanges fades away, the pair will focus on the prospect for a more aggressive ECB tightening and will resume the dominant upside bias as Fed’s three hikes this year are already fully priced in. But the problem is that the global sell-off could continue for some time, may be until late this month, before a steady recovery takes place. So in the short-term, the EURUSD pair will likely continue to feel pressure from the greenback. At this stage, the price needs to hold above the 1.22 mark in order to avoid another sell-off.

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