• EUR/USD came close to printing fresh annual lows above 1.0800 earlier in the session but is now flat near 1.0830.
• EUR/USD bears are eyeing a break below the big figure and a run towards 2020 lows in the 1.0630s.

EUR/USD came within a whisker of hitting fresh annual lows under the March 1.0806 bottom earlier on Wednesday morning but has since rebounded back to trading flat on the day in the 1.0830 area. Ahead, the release of US Producer Price Inflation data at 1330BST could cause some choppiness as the Consumer Price Inflation report on Tuesday did, given the intense market focus on inflation and the Fed’s reaction function as of late.

An upside surprise, if it results in US yields rallying back to test multi-year highs printed earlier in the week, could push EUR/USD below 1.0800. No Fed speakers are scheduled, but recent commentary suggests that the bank is keen to press ahead with tightening plans. This, combined with ongoing geopolitical risks in Eastern Europe with Russo-Ukraine peace talks seemingly not going anywhere right now, suggests it makes sense for a EUR/USD downside bias to continue.

A break below 1.0800 would see the pair hit fresh lows since May 2020 and would bring into focus April 2020 lows in the low 1.0700s. Below that reside the 2020 lows in the 1.0630s, just 1.8% lower versus current levels. Unless the ECB gets cracking with monetary policy tightening, which they have slowly been leaning towards in recent weeks, or unless there is a sudden Russo-Ukraine peace pact, there isn’t much to prevent EUR/USD dropping to these levels.