EUR/USD drops to multi-week lows near 1.0830 on stronger dollar, risk aversion

• EUR/USD adds to the weekly leg lower and retests 1.0830.
• The greenback appears well bid amidst persistent risk aversion.
• EMU Final Inflation Rate due next in the domestic docket.

Sellers remain in control of the sentiment around the European currency – and the risk complex in general – and now drag EUR/USD to new lows in the vicinity of 1.0830 on Wednesday.

EUR/USD weaker on USD-buying

The persevering risk aversion continues to underpin investors’ preference for the greenback and keeps EUR/USD on the defensive for the second consecutive week so far on Wednesday.

Indeed, spot navigates an area last seen in early April around 1.0830 amidst unabated concerns surrounding the US debt ceiling issue, while a small decline in the German 10-year Bund yields also accompany the daily downtick.

Collaborating with the sour mood in the single currency, ECB’s Board member de Cos suggested that the bank’s hiking cycle is getting close to its end. His view, however, appears quite in contrast to many of his colleagues’, who kept favouring the continuation of the tightening bias in the June and July meetings (and September?).

Data wise in the region, New Car Registrations in the EU rose 17.2% in the year to April, while final inflation figures in the broader Euroland for the month of April are due later in the morning.

Across the pond, weekly Mortgage Applications come in the first turn seconded by Housing Starts and Building Permits.

What to look for around EUR

EUR/USD extends the weekly decline and gradually approaches the key 1.0800 neighbourhood on Wednesday.

The movement of the euro's value is expected to closely mirror the behaviour of the US Dollar and will likely be impacted by any differences in approach between the Fed and the ECB with regards to their plans for adjusting interest rates.

Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: EMU Final Inflation Rate (Wednesday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle in June and July (September?). Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is retreating 0.21% at 1.0838 and faces immediate contention at 1.0831 (weekly low April 10) seconded by 1.0804 (100-day SMA) and finally 1.0788 (monthly low April 3). On the flip side, the breakout of 1.1095 (2023 high April 26) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022).