The euro continues its ascent from last Friday, with EURUSD refreshing nearly two-week highs above the 1.09 handle. The common currency encountered a local resistance around 1.0950 during the European hours and thus has settled between the 100- and 50-DMAs. Now, the question is if the prices manage to preserve the upside momentum, or the pair will proceed to a bearish correction.
The main driver behind the euro’s reсent strength is a widespread risk-on sentiment that sent the safe-haven dollar lower. Market optimism was fueled by hopes for a robust economic recovery after the US firm Moderna said experimental vaccine showed good results. Amid these reports, investors shrugged off a further escalation in the US-China trade tensions.
As a result, EURUSD spiked above the 1.09 handle that capped the bullish attempts previously. The USD index came under a more intense selling pressure on Monday when the price broke below the 100.00 psychological level. However, the risk of a deeper pullback has receded recently, as risk sentiment started to show signs of deterioration after a rally in the US and Asia earlier today, with European stock markets turning negative after a positive start to the session.
Now, the downside risks for the euro are limited as long as the pair remains above the 50-daily moving average around 1.09. Should the prices break above the mentioned intermediate resistance, the 1.10 level will come back into market focus. However, to extend gains to this barrier, the common currency will first need to make a clear break above the 100-daily moving average around 1.0970.
On the data front, upbeat results from the ZEW survey added to the move up recently. Economic sentiment in Germany and the Eurozone arrived at 51.0 and 46.0, respectively in May. Layer in the day, Federal Reserve Governor Jerome Powell will testify before the Senate Banking Committee. His rhetoric may set further tone for the pair.