The dollar strengthened across the board on Thursday despite a fall in US bond yields, suggesting the move was driven by risk aversion increasing demand for defensive assets. Against this backdrop, EUR/USD took a big hit during the session, down 0.6% to 1.0910 at the time of writing.

In equities, the S&P 500 was also lower, with the index down 0.35 percent at 4,135 in afternoon trade, hit by weakness in most cyclical sectors. The sell-off would have been even bigger if not for the strong rally in Alphabet's stock, which rose about 5% on "AI hype" after the new product launch (Alphabet is Google's parent company).

In any case, fresh concerns about regional banks sparked negative sentiment after PacWest Bancorp (PACW) revealed it lost 9.5 percent of its deposits last week, suggesting outflows could re-accelerate amid growing pessimism surrounding the sector.

The chief executive of jpmorgan Chase & Co. appeared to reinforce the downbeat tone on Wall Street by warning that the recent banking turmoil was not over and that losses in commercial real estate could bring down some financial firms.

The big increase in jobless claims has made things worse for risky assets. The number of Americans filing for unemployment benefits climbed to the highest level in 18 months in the week ended May 6, according to the Labor Department, a sign that cracks may be starting to show in the job market.

While rising unemployment could lead the Fed to adopt a dovish stance sooner than expected, the impact of the policy shift may not be transmitted linearly to most assets. For example, before steadily weakening, if markets start to wobble due to a looming downturn, the dollar could rise on safe-haven flows.

Technical analysis of EUR/USD

After the recent pullback, EUR/USD appears to be above technical support around the psychological level of 1.0900. If the bulls fail to resist the current bearish attack and the bottom is breached, the selling momentum could accelerate, setting the stage for a move towards trend line support at 1.0850.

On the other hand, if buyers regain the upper hand and cause prices to reverse higher from current levels, initial resistance appears at 1.1035. Strengthening further, the focus turns to the 2023 swing high just below the 1.1100 mark.

Eur/USD technical chart

S&p 500 technical analysis

A close examination of the daily chart of the S&P 500 shows that the price is forming a double bottom pattern, which is a bullish pattern based on technical analysis. This configuration is not yet complete and will be confirmed by a break above the resistance level of 4,200. This bullish breakout could open the possibility of a move toward 4,310, which is the 61.8% retracement of the 2022 decline.

Conversely, if sellers regain control of the market and push the index lower, the first level of support to consider is 4,100, then 4,075. If both levels fall decisively, then the double bottom pattern fails, paving the way for a fall to 4150. Further weakness could embolden bears to attack the 4,000 trendline support.