EUR/USD traded lower on Monday and prospects for rallies should remain dim on concerns about the global economic growth outlook and expectations for aggressive Fed policy tightening.
China's COVID lockdown policies are negatively affecting growth.
April PMI data come in below lowered expectations nL2N2WT01Z, which helped drive yuan weakness CNH= and buoy the dollar.
Concerns about euro zone growth, which is highly correlated to China growth, increase as April economic sentiment came in below estimates while March sentiment was revised lower nL5N2WU1FU.
German yields dropped on the data and drove German-U.S.
yield spreads US2De2=R wider, which increased the dollar's yield advantage and, in turn, weighed down EUR/USD.
EUR/USD technicals highlight downside risks.
Daily and monthly RSIs are falling, implying downside momentum remains.
EUR/USD's rally off the April 28 daily low appears to be corrective in nature, which reinforces bearish technical sentiment.
A daily close below the psychological 1.0500 level will bolster confidence for EUR/USD shorts.
A test of the 2017 yearly low at 1.0340 seems probable.
Should that low break EUR/USD shorts will target parity.
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