• EUR/USD remains sidelined after declining to the lowest levels since December 2002.
• Fears of Eurozone recession escalated after Russia’s unscheduled maintenance of Nord Stream 1 pipeline.
• Yields rose, equities dropped as traders fear more economic hardships ahead, hawkish Fed bets increase.
• Preliminary reading of August S&P Global PMIs for Eurozone, US will decorate calendar.

EUR/USD bears take a breather after renewing a two-decade low near 0.9925 marked the previous day, a 0.9945 by the press time, as they await the flash readings of August PMIs during early Asian session on Tuesday. The major currency pair refreshed the multi-year low as market’s fear of recession, as well as the Fed’s aggression, escalated ahead of this week’s top-tier data/events.

Russia’s unscheduled maintenance of Nord Stream 1 pipeline unveiled a blow to the struggling Eurozone economy amid the energy crisis. The fears grew stronger as the firmer US data signalled the Fed’s aggression.

It’s worth noting that Bundesbank President, as well as the European Central Bank (ECB) policymaker, Joachim Nagel mentioned that the ECB must keep raising interest rates even if a recession in Germany is increasingly likely, as inflation will stay uncomfortably high all through 2023. Also, the Germany’s monthly report from Bundesbank signalled that a recession in Germany is increasingly likely while also suggesting that inflation will continue to accelerate and could peak at more than 10%. On the contrary, German Economy Minister Robert Habeck stated, “A good chance to get through winter without drastic energy measures.”

On the other hand, Chicago Fed National Activity Index improved to 0.27 in July, from a downwardly revised -0.25 prior.

Amid these plays, Reuters mentioned that Fed funds futures on Monday have priced in a 54.5% chance of a 50 basis-point (bp) rate hike at the Fed's policy meeting next month. The fed funds rate is seen hitting roughly 3.6% by the end of the year, with a peak rate of nearly 3.8% in March 2023.

It’s worth noting that the US 10-year Treasury yields rose to the fresh monthly high around 3.02% while Wall Street closed in the red amid the risk-off mood.

Moving on, EUR/USD traders should pay attention to the preliminary readings of German and the US PMIs for August for fresh impulse ahead of the same activity data for the US scheduled to be released later in the day. However, major attention will be given to Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, up for publishing on Wednesday.

Technical analysis

A daily closing below the previous 20-year low, marked in July around 0.9952, appeared to have opened the door for the EUR/USD slump towards the 61.8% Fibonacci Expansion (FE) of May-August downturn, near 0.9850-45.