EUR/USD Extends Losses Amidst Challenging Market Sentiment

The EUR/USD pair faced a bearish start to the week, as it closed the first three days in negative territory, reaching its lowest level since July 7. However, a slight rebound was observed thereafter. Despite the bounce, the technical outlook for the pair remains bearish, with the market sentiment favoring risk aversion, making it challenging for the Euro to regain strength against the US Dollar (USD) in the near future.

The USD gained momentum after robust data from the US indicated a significant increase in private-sector employment. With a notable surge of 324,000 jobs in July, surpassing market expectations of 189,000, the USD continued to strengthen. Moreover, major equity indexes experienced a sharp decline following Wall Street's opening bell, which further supported the USD's position and pushed the EUR/USD pair to extend its downward trajectory.

The prevailing safe-haven flows continue to dominate the markets, as evident from the Euro Stoxx 50 Index being down over 1% and US stock index futures showing losses between 0.4% and 0.6%. This ongoing market sentiment could further weigh on the EUR/USD pair during the American trading session, should Wall Street witness another bearish opening and US stocks continue to slide.

Market participants are closely monitoring two key factors that could impact the pair's performance. First, the weekly Initial Jobless Claims data, which, if reported smaller than anticipated, could provide an additional boost to the USD ahead of Friday's jobs report. Second, the July ISM Services PMI data, with particular attention to the Employment component reading, as a reading above 50 might further support the USD's strength.

In conclusion, the EUR/USD pair faces an uphill battle amid the prevailing risk-averse market sentiment and the recent surge in the US job market data. The currency pair's technical bearishness and the potential impact of upcoming economic indicators could contribute to a challenging period for the Euro against the resilient US Dollar in the near term.

TurnAround Point: 1.0960

Our preference

Short positions below 1.0960 with targets at 1.0900 & 1.0880 in extension.