• EUR/USD came under fresh selling pressure on Thursday and dropped closer to the monthly low.
• Recession fears triggered a fresh wave of the risk-aversion trade and boosted the safe-haven USD.
• The post-SNB slump in the EUR/CHF cross weighed on the euro and contributed to the selling bias.

The EUR/USD pair met with a fresh supply near the 1.0470 region on Thursday and continued losing ground through the early European session. The downward trajectory dragged spot prices further below the 1.0400 mark, back closer to over a one-month low touched the previous day.

The US dollar made a solid comeback and reversed the overnight post-FOMC losses amid a fresh wave of the global risk-aversion trade. The Fed on Wednesday projected a slowdown in the economic growth and rising unemployment in the months to come. Against the backdrop of global supply chain disruptions caused by the Russia-Ukraine war and the COVID-19 outbreak in China, the gloomy outlook further fueled recession fears and took its toll on the risk sentiment.

The anti-risk flow was evident from a steep fall in the US equity futures, which drove haven flows towards the greenback. The shared currency was also pressured by the fact that the European Central Bank failed to ease nervousness over fragmentation risks and deliver any new measures to support highly indebted nations in the bloc. Adding to this, some cross-driven weakness stemming from the post-SNB selloff in the EUR/CHF cross weighed on the euro.

The fundamental backdrop favours bearish traders, though it will be prudent to wait for some follow-through selling below mid-1.0300s, or the YTD low, before positioning for any further losses. Traders now look forward to the US economic docket - featuring the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and housing market data. This, along with the US bond yields and the broader risk sentiment, would influence the USD and provide a fresh impetus to the EUR/USD pair.

Technical levels to watch