Euro Slips Against Dollar Amid Risk Aversion and ECB Hawkishness

The Euro has declined about 0.5% against the US Dollar, with broad-based USD strength driven by risk aversion. According to Scotiabank strategists Shaun Osborne and Eric Theoret, yield spreads imply a fair value near $1.1633 for the EUR/USD pair. They highlight major support around $1.15, with limited near-term resistance before $1.1650.

The Euro's weakness is largely attributed to sentiment-driven factors, with yields remaining relatively well supported. Fundamental releases have been light ahead of Tuesday's ZEW survey, which is expected to provide insight into investor sentiment and industrial production. The European Central Bank (ECB) has recently turned more hawkish on energy-driven inflation, as Executive Board member Schnabel characterized the rise in energy prices as 'quite concerning'.

The EUR/USD pair has dropped to its 50-day moving average at $1.1531, with momentum entering the low 40s. The Relative Strength Index (RSI) has fallen into bearish territory, indicating a potential downtrend for the Euro.