EUR/USD rebounds modestly from 1.2000, stays in the negative territory
- EUR/USD remains on the back foot on Tuesday.
- Wall Street's main indexes fall sharply as market mood sours.
- US Dollar Index clings to daily gains above 91.00.
The EUR/USD pair dropped below 1.2000 for the first time in nearly two weeks on Tuesday. Although the pair managed to erase a portion of its daily losses in the last hour, it's still down 0.3% on a daily basis at 1.2027.
The USD's market valuation continues to impact EUR/USD's movements. Following Monday's decline, the US Dollar Index (DXY) gained traction on Tuesday with the greenback finding demand as a safe haven in the risk-averse market environment. Reflecting the dismal mood, Wall Street's three main indexes are down between 0.7% and 2.2% and the DXY is rising 0.25% at 91.20.
Earlier in the day, the data from the US revealed that Factory Orders rose by 1.1% in March, compared to analysts' estimate for an increase of 1.3%. Moreover, the IBD/TIPP Economic Optimism Index dropped to 54.4 in May from 56.4 in April.
There won't be any other macroeconomic data releases from the US and the broad-based USD strength is likely to force EUR/USD to close in the red.
On Wednesday, the Markit Services PMI from the euro area and the US will be looked upon for fresh impetus. Additionally, the ISM Services PMI and the ADP Employment Change data will be featured in the US economic docket as well.
EUR/USD near-term outlook
FX Strategists at UOB Group think that EUR/USD could push lower with a break below 1.1975.
"The recent positive phase has run its course and the near-term bias is tilted to the downside. That said, EUR has to break the major support at 1.1975 before a more sustained (and sizeable) pullback can be expected," strategists said. "At this stage, the prospect for a break of 1.1975 is not high but it would increase unless EUR moves above 1.2105 within these few days."
Technical levels to watch for