Euro continues decline against greenback

The Euro (EUR) continues its descent against the US Dollar (USD), causing EUR/USD to reach fresh lows not seen in three months, hovering around 1.0715 on Tuesday. The renewed selling pressure surrounding spot seems to be driven by disappointing Caixin Services PMI data from China, indicating a slowdown in the country's services sector. Additionally, the domestic final readings from the Eurozone's own services sector did not provide any support for the single currency either.

The investors’ bias towards the safe-have universe lends support to the Greenback early in the European morning and lifts the USD Index (DXY) to new highs beyond 104.80 amidst the still unclear direction in US and German bond yields.

Meanwhile, the market remains confident regarding the Federal Reserve's (Fed) decision to halt its campaign of interest rate hikes for the remainder of the year. In addition, speculation has begun to emerge over the possibility that interest rate cuts may not materialize until March 2024.

On the other hand, the European Central Bank (ECB) finds itself navigating a climate of heightened uncertainty surrounding the potential course of interest rates beyond the summer months. Market discussions revolve around the concept of stagflation, further contributing to the prevailing sense of ambiguity.

EUR/USD remains under pressure and the recent breach of the key 200-day Simple Moving Average (SMA) at 1.0819 seems to prop up the likelihood of extra losses in the short term.

If EUR/USD accelerates its losses, it could revisit the May 31 low of 1.0635, prior to the March 15 low of 1.0516. The loss of the latter could prompt a potential test of the 2023 low at 1.0481 from January 6.

On the upside, spot is expected to target the critical 200-day SMA at 1.0819. North from here, bulls should meet the the weekly top of 1.0945 seen on August 30 ahead of the interim 55-day SMA at 1.0958 and prior to the psychological 1.1000 barrier and the August top at 1.1064. Once the latter is cleared, spot could challenge July 27 peak at 1.1149. If the pair surpasses this region, it could alleviate some of the downward pressure and potentially visit the 2023 peak of 1.1275 seen on July 18. Further up comes the 2022 high at 1.1495, which is closely followed by the round level of 1.1500.