EUR/USD weakens further below 0.9800 mark, lowest level since October 2002

• A combination of factors drags EUR/USD to its lowest level since October 2002 on Friday.
• Aggressive Fed rate hike bets and the risk-off impulse lift the USD to a fresh 20-year high.
• Disappointing PMIs from France and Germany fuel recession fears and weigh on the euro.

The EUR/USD pair comes under some renewed selling pressure on Friday and drops to its lowest level since October 2002, around the 0.9765 region during the early European session.

Following the previous day's volatile price swings, the US dollar regains strong positive traction and is seen dragging the EUR/USD pair. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, hits a new 20-year peak and remains well supported by a more hawkish stance adopted by the Fed.

It is worth mentioning that the US central bank signalled on Wednesday that it will likely undertake more aggressive rate increases to cap inflation. This, along with the prevalent risk-off environment, offers additional support to the safe-haven greenback. The market sentiment remains fragile amid growing worries about a deeper global economic downturn.

The euro, on the other hand, is pressured by the risk of a further escalation in geopolitical tensions, especially after Russian President Vladimir Putin announced a partial military mobilization. Apart from this, the energy crisis in Europe, which could drag the region's economy deeper into recession, is also seen weighing on the shared currency.

The market fears were further fueled by the release of worse-than-expected flash Manufacturing PMI prints from France and Germany - the Eurozone's two largest economies. Furthermore, Friday's downfall could also be attributed to some technical selling below the 0.9800 round-figure mark, which might have already set the stage for further losses.

Technical levels to watch