EUR/USD comes under downside pressure and revisits 1.1320

• EUR/USD drops to 2-day lows near 1.1320.
• Risk aversion weighs on the pair and supports the dollar.
• ECB-speak, US weekly Claims, Philly Fed Index next on tap.

The resumption of the risk-off mood among investors lends fresh oxygen to the dollar and forced EUR/USD to retreat to the 1.1320 region, or 2-day lows, on Thursday.

EUR/USD weaker on geopolitical concerns

EUR/USD grinds lower and reverses two consecutive sessions with gains in the second half of the week on renewed geopolitical jitters stemming from the Russia-Ukraine conflict. Indeed, fresh risk aversion irrupted in the markets, motivating the demand for the greenback to revive and put the pair under moderate downside pressure.

The knee-jerk in spot comes in tandem with further correction in yields of the key German 10y bund, which retreat to the 0.25% region, or multi-day lows, so far on Thursday.

Later in the session, ECB’s Board members I.Schnabel and P.Lane are due to speak. In the NA session, the focus of attention will be on the regional manufacturing gauge released by the Philly Fed seconded by usual Initial Claims and results from the housing sector.

What to look for around EUR

EUR/USD now seems to have met decent resistance around the 1.1400 zone amidst some loss of momentum in the relief rally in combination with the resumption of the geopolitical-led risk aversion. Looking at the broader scenario, the improvement in the pair’s outlook appears underpinned by fresh speculation of a potential interest rate hike by the ECB at some point by year end, higher German yields, persevering elevated inflation and a decent pace of the economic activity and other key fundamentals in the region

Key events in the euro area this week: Flash EMU Consumer Confidence (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is retreating 0.12% at 1.1358 and faces the next up barrier at 1.1395 (weekly high Feb.16) followed by 1.1491 (200-week SMA) and finally 1.1494 (2022 high Feb.10). On the other hand, a drop below 1.1323 (low Feb.17) would target 1.1279 (weekly low Feb.14) en route to 1.1186 (monthly low Nov.24 2021).