Title: EUR/USD weakens further below 0.9800 mark, lowest level since October 2002

September 23, 2022 03:50 AM ET

By: AnalysisWatch

The EUR/USD pair again comes under selling pressure on Friday and falls in early European trading to the lowest level since October 2002, around 0.9765.

After the volatile price fluctuations of the previous day, the U.S. dollar regains strong traction and drags the EUR/USD pair with it. The USD index, which measures the performance of the greenback against a basket of currencies, reached a new 20-year high and continues to be well supported by the more restrictive stance of the Federal Reserve.

It is worth noting that the Fed signaled on Wednesday that it is likely to raise interest rates more aggressively in order to contain inflation. Combined with the prevailing low-risk environment, this provides additional support for the safe-haven greenback. Market sentiment remains fragile amid rising concerns about a deeper global economic downturn.

On the other hand, the euro is being pressured by the risk of a further escalation of geopolitical tensions, especially after Russian President Vladimir Putin announced a partial mobilization of the military. In addition, the energy crisis in Europe, which could drag the region's economy deeper into recession, is also seen as a burden on the single currency.

Market fears were further fueled by the release of worse-than-expected manufacturing purchasing managers' indexes in France and Germany, the two largest economies in the eurozone. In addition, Friday's decline may also be due to technical selling below the round mark of 0.9800, which may have already set the stage for further losses.