EUR/USD looks south towards 1.0100 ahead of German ZEW

• EUR/USD is extending the previous sell-off, 1.0100 appears at risk.
• US dollar holds higher ground amid a cautious mood, despite weaker yields.
• Daily technical setup suggests more pain for the pair, eyes on German ZEW.

EUR/USD is looking to extend the two-day bearish momentum this Tuesday, as bears aim for the 1.0100 demand area amid a risk-averse market condition.

Despite the Wall Street advance on preference for growth stocks, the Asian markets appear in a cautious mood, as the recent Chinese data inflicted pain and alarmed recessionary fears worldwide.

The reduced appetite for riskier assets keeps the buoyant tone intact around the safe-haven US dollar, despite the ongoing weakness in the Treasury yields. The US dollar index holds steady at around 106.55, at the time of writing, while the benchmark 10-year rates are down about 0.50% to trade at 2.775%.

The market’s attention has now shifted to lingering recession fears, as they also remain worried about the size of the upcoming Fed rate hikes following the softer US inflation data. The minutes of the Fed July meeting will be closely followed to get hints on the central bank’s next policy move.

Ahead of that, the ZEW survey from the Eurozone and Germany will be eyed, as it may confirm a recession in the old continent amid the deepening energy and supply-side crisis. The drying up of the Rhine River has exacerbated the pain in the euro.  

The German headline Economic Sentiment is seen improving slightly to -52.7 in August vs. -53.8 previous while that of the Eurozone is expected at -42.5 vs. -51.1 prior. Meanwhile, investors will also look forward to the US housing data for fresh dollar valuations.

EUR/USD: Technical outlook

Technically, EUR/USD closed Monday below the critical short-term 21-Daily Moving Average (DMA) at 1.0210, opening floors for further downside. The 14-day Relative Strength Index (RSI) hovers below the midline, justifying the bearish potential. Sellers are likely to test the August 3 low of 1.0122 en route to the 1.0100 mark.

EUR/USD: Additional technical levels to watch