EUR/USD records five-year lows but trims some losses and hovers around 1.0560s

• The EUR/USD accumulates weekly losses close to 2.12%, the largest since June 2021.
• A risk-on market mood lifted the euro’s prospects after reaching a YTD low at 1.0514.
• EUR/USD Price Forecast: Poised to test January’s 2017 swing lows around 1.0340.

The EUR/USD continues its free fall in the month, which accelerated since April’s 22, when the EUR/USD closed around 1.0831, plunging more than 400 pips since the close, towards the fresh 5-year-low around 1.0514, recorded on Wednesday. At 1.0564, the EUR/USD recovered some ground, aiming to finish the day with losses for the fifth consecutive trading day.

Shanghai to ease lockdown restrictions, lifts the market mood

Investors’ mood improved since the mid-North American session. Probably on the news from China, as Shanghai is about to ease lockdowns following a Covid-19 outbreak that hit the second largest Chinese city a couple of weeks ago. That threatened to disrupt the supply side component of the second biggest worldwide economy. In the meantime, the conflict between Ukraine and Russia appears to be extending longer than expected. Additionally, Russia’s retaliation against “unfriendly” countries began on Tuesday, when the Russian gas producer Gazprom halted gas flows to Poland and Bulgaria, as both countries refused to pay for it in roubles.

The greenback remains buoyant, as shown by the US Dollar Index, rising above the 103.000 mark for the first time since January 4, 2017. As of writing, it sits at 102.846, up almost 0.53%. Meanwhile, the US 10-year Treasury yield is staging a comeback and is trimming Tuesday’s losses, gaining seven and a half basis points, sitting at 2.799%.

Upcoming in the economic docket, the Eurozone would reveal April’s Consumer Price figures. Across the pond, the Q1 Gross Domestic Product by Thursday and on Friday, the Fed’s favorite inflation indicator, the Core PCE, is expected to downtick to 5.3% from 5.4% y/y.

EUR/USD Price Forecast: Technical outlook

The EUR/USD remains defensive, and it seems that it could aim towards January’s 2017 lows around 1.0340. The EUR/USD is recording its worst week since June 2021 and is accumulating losses close to 2.10% as of writing. Also, momentum indicators like the Relative Strength Index (RSI), albeit at oversold conditions, seem poised to record lower readings. At the time of writing stands at 27.09.

With that said, the EUR/USD first support would be 1.0500. A breach of the latter would expose 1.0450, followed by 1.0400, and then a test of January’s 2017 cycle lows near 1.0340.

Key Technical Levels