EUR/USD drops below 1.0800, closes Macron win-led bullish open gap

• EUR/USD is back in the red after bulls fail to sustain the recovery momentum.
• Risk-aversion, Lagarde’s comments offset Macron win-induced opening gains.
• German IFO survey eyed amid a relatively quiet start to the US GDP week.

EUR/USD is resuming its downtrend towards the previous week’s low of 1.0761, wiping out all of its early gains triggered by the French Presidential election results.

In doing so, the main currency pair closed out the bullish opening gap of about 50-pips to 1.0841 highs. The main catalyst behind the latest leg lower could be attributed to Sunday’s remarks from European Central Bank (ECB) President Christine Lagarde.

Lagarde said in an interview with CBS TV, "We will be interrupting the purchases of assets in the course of the third quarter, a high probability that we do so early in the third quarter. And then we will look at interest rates and how and by how much we hike them."

Her comments poured cold water on the expectations for a July ECB rate hike, as hinted by other ECB policymakers all through the last week.

Additionally, risk-off flows returned in Asia amid increased concerns over the impact of the aggressive Fed’s tightening on the American corporate sector, as borrowing costs surge. The souring market mood offered extra legs to the ongoing rally in the safe-haven US dollar across its main peers.

In the opening trades, the shared currency spiked nearly 50-pips from Friday’s close versus the US dollar after projections by France’s five main pollsters put incumbent Emmanuel Macron on course to win about 58% of the vote in Sunday’s runoff compared with 42% for Marine Le Pen. 

Looking ahead, the US Q1 Preliminary GDP stands out amid the Fed’s ‘blackout’ period while the ECB commentary will also remain in the spotlight. In the meantime, the German IFO survey due for release later on Monday will be closely followed alongside risk sentiment for fresh trading incentives.

EUR/USD: Technical levels to consider