USD Bulls Send The Euro Lower

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European stocks traded in negative territory on Tuesday amid resurgent concerns over inflation and economic slowdown. Earlier in the day, fresh data showed that Germany’s factory orders fell 2.7% month-over-month in April versus +0.5% expected and -4.2% last. On an annualized basis, orders slumped 6.2% versus 3.1% in March.

As risk sentiment deteriorated, the safe-haven dollar attracted renewed demand to notch two-week highs around 102.85, thus targeting the 103.00 mark for the first time since late May. The USD index capitalized on the rallying yields, with the benchmark 10-year US Treasury yield rising above 3% at the start of the week. As US stock index futures are down during the European hours, a risk-averse environment could persist on Wall Street, thus supporting the greenback further.

Against this backdrop, EURUSD keeps bleeding Tuesday, challenging the 1.0650 intermediate support. Should this bearish barrier give up, the pair will target the ascending 20-DMA, currently, at 1.0620, that has been acting as support since May 20. In turn, this moving average is followed by 1.0600 psychological support.

Later in the week, the ECB is expected to current monetary policy on hold while also hinting at a rate hike in July. The main question now is whether the central bank will raise rates by 25 or 50 basis points. A hawkish tone from Lagarde could push the common currency higher across the market. However, should the ECB disappoint with more cautious rhetoric, the euro will see deeper losses ahead of the US inflation report that will set the further tone for USD pairs on Friday.