EURUSD extends its bearish correction from highs around 1.12, accelerating the decline after a break below the important 200-DMA at 1.1150. On Friday, the pair plunged to an over one-week low of 1.1089 and now makes some attempts to regain the 1.11 handle. As a result, the common currency turned negative in the weekly timeframes after two weeks of gains.
Of note, there are no any fundamental drivers behind the move. The correction is likely attributed mainly to a rise in dollar demand amid growing US Treasury yields. At that, the greenback struggles to gain versus the safe haven Japanese yen, which confirms that global investors remain cautious despite a decent rise in the European stock markets and a tepid pick up in the US stock index futures during the last trading day of the week.
In its flash estimate, the Bank of Spain said that the Spanish economy is expected to grow 0.4% in the last quarter of the year. The central bank also pointed to a high possibility of a slowing growth toward 2022 amid lower consumer consumption and business investment. Meanwhile, the Bank of Greece reported that the country’s current account deficit shrank in October due to higher tourism revenues.
Anyway, the common currency ignored the data from the periphery European countries as traders are focused on technical signals. The fact that the pair failed to get back above the 200-DMA has upset euro bulls and now, traders prefer to take profit ahead of the weekend. By the way, trading volumes are getting thinner ahead of Christmas holidays, which could bring more volatility to the markets in the days to come.
In the short term, EURUSD needs to regain the 1.11 level and see a weekly close at least above the 1.1120 in order to avoid another sell-off towards the key 100-DMA which serves as an important support around 1.1065. should the single currency fail to trim its intraday losses, downside risks could pick up. Further dynamics will depend on market sentiment surrounding the greenback in general. So far, there are no signs of a sustained extension of dollar buying.