EUR/USD retreats towards 0.9600 as Russia-linked risk-aversion, hawkish Fedspeak propels DXY

• EUR/USD holds lower ground after refreshing 20-year bottom.
• Market sentiment remains sour after cable slumped to all-time low, Russia-inspired geopolitical woes spread.
• Hawkish Fedspeak, firmer US data versus downbeat EU figures also weigh on prices.
• ECB’s Lagarde, Germany IFO numbers and Italian politics eyed for intraday directions.

EUR/USD fades bounce off the recently flashed 20-year low of 0.9553, around 0.9630 heading into Monday’s European session, as bears keep reins amid a broad risk-off mood.

Fears of multiple central banks’ intervention and those emanating from Russia weigh on the market sentiment during early Monday. In addition to the risk-aversion, the downbeat activity numbers from the bloc, versus upbeat US statistics, also weigh on the EUR/USD prices.

After the GBP/USD pair’s slump to the record low, the Bank of England’s (BOE) intervention appears imminent. That said, the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) are on the other hand to defend their domestic currencies from weakening too much while keeping the monetary policy intact.

On the other hand, Friday’s first readings of the US S&P Global PMIs for September raised concerns about the firmer rate hikes by the US Federal Reserve (Fed) as the numbers were upbeat, as compared to softer figures for Europe. Following the data, Fed Chairman Jerome Powell, Vice Chair Lael Brainard and Atlanta Fed President Raphael Bostic all were mostly bullish and in favor of further rate hikes.

At home, German Services PMI dropped to the two-year low while its counterpart for Europe tested the lowest levels in 19 months. Overall, the first readings of September month S&P Global PMIs suggested that the European economy slipped further into contraction, hurt by soaring energy prices.

Elsewhere, the global ire towards Russia’s plan to deploy more troops around Ukraine also exerted downside pressure on the EUR/USD prices, via the US dollar strength. Recently, Japan bans chemical weapons-related goods to Russia, concerned by nuke threats, per Reuters.

Against this backdrop, S&P 500 Futures drop half a percent while the US 10-year Treasury yields add four basis points to 3.74% at the latest.

Looking forward, the risk-off mood could keep the EUR/USD prices pressured. However, comments from European Central Bank (ECB) President Christine Lagarde and sentiment numbers from Germany’s IFO institute could direct intraday moves. That said, the latest exit poll from Italy suggests that Giorgia Meloni is all set to become the nation’s first Prime Minister even as some in the region criticize her for certain approaches.

Technical analysis

Six-month-old bearish channel and sustained trading below the previous key support line from July, now resistance around 0.9830, keep the EUR/USD sellers hopeful.