© Reuters.

By Yasin Ebrahim

Investing.com – The euro fell to more than 16-month lows against the dollar Monday and is in for more pain after breaking through key support amid expectations for European central banks to remain dovish.

fell 0.59% to $1.1383.

In a hearing at the European Parliament’s Committee on Economic and Monetary Affairs  ECB President Christine Lagarde on Monday reiterated that the ECB continues to expect inflation to remain below target in the medium-term and “very unlikely ” to be compatible with rate hikes next year.

“At a time when purchasing power is already being squeezed by higher energy and fuel bills, an undue tightening of financing conditions is not desirable, and would represent an unwarranted headwind for the recovery,” Lagarde said.

The comments came amid growing fears that the European Union economy could suffer a setback as parts of Europe including the Netherlands and Austria have returned to partial lockdowns to curb a surge in Covid cases.

Germany, the most productive EU nation, is reportedly set to plan national restrictions for the unvaccinated.

“New lockdowns in Europe fuel growth concerns,” Commerzbank said, after noting the risk of further downside as the EUR/USD testing key support of $1.1420 before breaking lower.

Others agree and see EUR/USD falling to $1.13 by the end of November.

“Last week saw EUR/USD break below 1.1500, and we think there is now room for the pair to decline to the 1.1300 level by the end of November,” ING said in a note.

The latest positioning data, however, suggests that traders are betting on some respite for the single currency after trimming their bearish bets.

Speculative bets against the euro fell to five-week lows, with the net position on open interest rebounding further and flirting with the positive territory, according to the Commodity Futures Trading Commission Positioning Report for the week ended Nov. 2.

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