EUR/USD renews 22-year low as yields propel DXY, focus on ECB vs. Fed drama, energy crisis

• EUR/USD takes offers to refresh multi-year low during seven-day downtrend.
• US Treasury yields rally to fresh cycle highs amid fears of economic slowdown, hawkish central banks.
• Energy crisis in Eurozone joins fears of more drama on the Russia-Ukraine issue to keep bears hopeful.
• Speeches from ECB’s Lagarde, Fed’s Powell eyed for further direction while keeping bearish bias.

EUR/USD stands on slippery grounds as it drops to the fresh low since June 2002 during early Wednesday morning in Europe, taking offers near 0.9550 by the press time.

The major currency pair’s latest weakness could be linked to the jump in the US Treasury yields amid broad economic fears. Also keeping the greenback firmer were the comments from the White House (WH) Economic Adviser Brian Deese and San Francisco Fed President Mary Daly, not to forget pessimism emanating from China and Europe.

WH Economic Adviser Deese’s comments that he does not anticipate the need for the global accord to adjust currency values seemed to have pleased the US dollar bulls of late. The policymaker also stated, “I'm fundamentally optimistic about the US economy, which can emerge stronger than before the pandemic.”

On the other hand, Reuters quotes the China Securities Journal to mention that the People’s Bank of China (PBOC) is likely to maintain liquidity injections via reverse repo operations to keep month-end liquidity reasonably ample and stabilize money market interest rates. The PBOC has injected net liquidity over the past seven trading days and the net injection of CNY173 billion on Tuesday was the highest since the end of February, the newspaper said.

It should be noted that the fears of more economic pain in the bloc, due to the Russian pipeline leakage in the Baltic Sea, seemed to have also contributed to the EUR/USD pair’s latest weakness.

Amid these plays, the US 10-year Treasury bond yields remain firmer at the highest levels since 2010, up three basis points (bps) near 4.0% at the latest. It’s worth noting that Wall Street closed mixed as traders remained unconvinced over the next step of major central bankers amid inflation woes. Further, the S&P 500 Futures drop 0.30% intraday to poke the 21-month low marked the previous day.

That said, EUR/USD remains pressured towards refreshing the multi-year low as risk-aversion joins firmer US fundamentals to favor the US dollar. However, the pair’s next moves hinge on the comments from Fed Chairman Jerome Powell and the European Central Bank (ECB) President Christine Lagarde.

Technical analysis

EUR/USD seller’s ability to break the year 2001 peak surrounding 0.9590 directs them to a six-month-old bearish channel, at 0.9475 by the press time.