EUR/USD comes under extra pressure and challenges 0.9700

• EUR/USD suffers the firmer momentum in the dollar around 0.9700.
• The greenback navigates in multi-session highs amidst risk-off mood.
• ECB Lane will speak later along with Fed’s Evans and Brainard.

Investors’ pessimism around the European currency grabs extra steam and forces EUR/USD to confront the 0.9700 region at the beginning of the week.

EUR/USD looks to risk trends

EUR/USD extends the bearish move for the fourth consecutive day and puts the 0.9700 neighbourhood to the test against the backdrop of further strength in the dollar following another solid print from Nonfarm Payrolls last Friday.

Indeed, the preference for the greenback lifts the USD Index (DXY) to fresh 2-week highs past the 113.00 mark amidst unabated conviction that the fed could raise rates by 75 bps at its November 2 meeting.

The knee-jerk in the pair comes in tandem with a corrective decline in the German 10-year bund yields following three consecutive daily drops.

Nothing scheduled data wise in Euroland other than a speech by ECB Board member P.Lane. Across the pond, the speeches by Fed’s Evans and Brainard will be the only events in the calendar.

What to look for around EUR

EUR/USD accelerates its losses and challenges the key support in the 0.9700 zone on Monday.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. Following latest results from key economic indicators, the latter is expected to extend further amidst the ongoing resilience of the US economy.

Furthermore, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the sour sentiment around the euro

Key events in the euro area this week: EMU Industrial Production, ECB Lagarde (Wednesday) – Germany Final Inflation Rate (Thursday) – EMU Balance of Trade (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EUR/USD levels to watch

So far, the pair is losing 0.43% at 0.9698 and faces the immediate support at 0.9535 (2022 low September 28) ahead of 0.9411 (weekly low June 17 2002) and finally 0.9386 (weekly low June 10 2002). On the upside, the surpass of 0.9999 (weekly high October 4) would target 1.0003 (55-day SMA) en route to 1.0050 (weekly high September 20).