The euro made some recovery attempts early on Monday but was rejected from the intraday highs around 1.0770 and got back below the 1.07 handle as the upside potential remains limited amid the persisting safe-haven dollar demand.
The sell-off in risky assents remerged on Monday despite the supportive measures taken by governments and central banks across the globe amid the continuing spread of the coronavirus. It looks like investors are hinting that policymakers in Europe and the United States should take even more drastic measures to contain the virus outbreak amid the growing recession threat.
As such, dollar demand persists, and the upside potential in the EURUSD pair remains limited while bearish risks continue to persist. Also, the volatility will likely remain heightened amid the coronavirus-related developments. In the days to come, several economic updates may affect short-term dynamics in the pair. Later today, the consumer confidence index in the Eurozone will be revealed. Tomorrow, advanced PMIs in the region for March will be published while the German IFO figures are scheduled for Wednesday. Should the numbers disappoint, EURUSD may come under more severe selling pressure, and the pair may challenge three-year lows around 1.0635.
In the longer run, the greenback could capitalize on its safe-haven status amid the impending global recession. In other words, the common currency may suffer deeper losses should the situation around the coronavirus continue to deteriorate further.
From the technical point of view, EURUSD needs to find a double bottom around the above-mentioned lows so that to switch into a recovery mode in the near term. In this scenario, the common currency may regain the 1.08 handle and retarget the key moving averages above 1.10. However, at this stage, the downside risks persist, and further declines may lie ahead before the euro stages a reversal. of note, the situation with the virus in Italy remains critical and may deteriorate further, which is also a negative driver for the single currency. For now, the 1.07 figure remains in market focus, as a daily close above this level will help to ease the immediate selling pressure.