The euro extends its rally on Friday, with EURUSD jumped above the 1.13 handle for the first time since July 2019 amid broad-based dollar weakness. Interestingly, the high-yielding European currency is on the offensive despite a massive risk aversion. This is due to the fact that fears about the spread of the virus in the United States are in focus now, with the 10-year US Treasury yields plunging to new all-time lows below 0.70%, thus weighing on the greenback across the board. Moreover, Trump for the first time acknowledged that the virus may cause damage to the US economy. 

There is another bearish driver for the dollar now after the Federal Reserve announced an emergency rate cut earlier this week. Despite the easing in monetary policy, traders expect the US central bank to cut once more during the meeting later this month. In this context, the incoming economic data will be important, as weaker-than-expected numbers could only add to the selling pressure surrounding the dollar. 

As such, EURUSD rallied above 1.13, extending gains to 1.1323 as the greenback continues to falter. The additional support for the common currency came from Germany, where January industrial orders unexpectedly recovered by more than 5%. Now, the pair needs to confirm a break above the 1.13 barrier on a daily closing basis. The overbought conditions suggest the rally could stall here, and a bearish correction may take place before the weekend. Still, fundamentally, the common currency has the upside potential at the current levels as the dollar was deprived of an important advantage in the form of monetary policy divergence. 

On the other hand, it is worth mentioning that coronavirus spread is seen in Europe as well, with Italy continues to face the rising number of cases. So, should the situation in the region deteriorate, EURUSD could give up some gains. Moreover, the ECB may send some dovish signals to the markets, citing the coronavirus-related risks, which could add to the potential pressure surrounding the European currency. 


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