Breaking: EUR/USD hits fresh five-year lows below 1.0636

• EUR/USD cracks the key support, with more pain in the offing.
• The US dollar cheers haven demand amid Fed-ECB policy divergence.
• Intensifying EU-Russia tensions over energy weigh on the euro ahead of Lagarde.  

EUR/USD has finally cracked the 2020 lows of 1.0636 on a sustained basis, now heading towards 1.0600, levels not seen since April 2017.

The unrelenting buying interest seen in the US dollar, as an ultimate safe-have asset, continues to weigh on the main currency pair.

Intensifying fears over China’s covid lockdowns and its impact on the global supply chains, re-ignited growth concerns, which keeps the haven demand for the dollar alive and kicking.

Meanwhile, the euro remains weighed down by reports that Russia will cut off the gas to Poland and Bulgaria in a major escalation in the standoff between Moscow and Europe over energy supplies.

This comes after the European Union (EU) said it weighs in a cap on the price paid to Russian oil importers, in a way to hit the Kremlin revenues.

On the other hand, EUR traders continue to ignore the hawkish ECB-speak, with policymaker Martins Kazaks having said Tuesday that he prefers the first-rate hike in July after the asset purchase programme (APP) ends at the start of the month.

Expectations of a double-dose Fed rate hike in May, as well as, in July underpin the Fed-ECB monetary policy divergence, keeping the buck favored.

All eyes now remain on the appearances by the ECB President Christine Lagarde later this Wednesday, in absence of the first-tier economics release on both sides of the Atlantic.

EUR/USD Technical levels to watch