The euro continues to head south in Wednesday trading. Currently, EUR/USD is trading at 1.1828, down 0.17% on the day.
Euro at its lowest level since November
Just four weeks ago, EUR/USD was basking above the 122 level and looking strong against the US dollar. Fast forward to the present, and the euro is struggling to keep above the 1.18 level as its trades at its lowest level since November 23rd. It’s been a dreadful March, with EUR/USD falling 2 percent this month. The main catalyst for the slide against the US dollar has been the significant rise in US Treasury yields, which have boosted the dollar. US 10-year yields rose to 1.73% on Friday, as shade below its 52-week high of 1.75%. If the upward trend resumes, we can expect the euro to lose more ground.
Investor sentiment towards the eurozone has been weak, to such an extent that excellent PMI data on Wednesday failed to give the euro a much-needed boost. On the manufacturing front, France, Germany and the eurozone all showed strong growth, highlighted by an outstanding German read of 66.6. Services also showed improvement, although France and the eurozone remain in contraction territory. German Services PMI improved to 50.8, the first time the index has shown growth in seven months.
The euro is also under pressure this week over a vaccine dispute with the EU. A shortage of AstraZeneca vaccines across Europe has resulted in a threat by the EU to block shipments of the vaccine to the UK. Such a move would likely send tense relations between the EU and the UK to a new low. The irony of the EU move to hoard vaccines has not been lost in British media, with The Telegraph newspaper publishing a survey which shows that a majority of people in Germany, France, Italy and Spain consider the AstraZeneca vaccine as unsafe.
EUR has broken below critical support at 1.1840, where the 200-DMA is also situated. If EUR closes below this level, we can expect further losses, with the next support line at 1.1808. If the downturn continues, it could potentially reach as low as the 1.16 level in the coming days. On the upside, 1.1971 has some breathing room in resistance as EUR loses ground.
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