EURUSD dipped to one-week lows around 1.0870 earlier in the day and bounced quickly during the European hours. Despite the pair has positive the neutral territory, the recovery potential still looks limited, and the euro is yet to confirm a break above 1.09 on a daily closing basis.
In part, the recent bullish attempts are due to a mostly positive risk sentiment as investors shrugged off another escalation of trade tensions between the United States and China over Hong Kong. Instead, market participants focus on expectations of global economic recovery after the coronavirus pandemic.
According to the latest reports, Japan announced the nationwide lifting of the state of emergency, which added to the upbeat tone in the financial markets and curbed the safe-haven dollar demand. Euro bulls also cheered the news that the German government plans to support the medium-sized firms by up to 50,000 euros per month.
On the data front, Germany May Ifo business climate index came in at 79.5 versus 78.5 expected, the current assessment index arrived at 78.9 versus 80.0 expected, while the expectations index recovered to 80.1 versus 75.0 expected. Despite the figures pointed to a rebound from historic lows registered in April, the overall picture remained gloomy amid the coronavirus pandemic. Still, the common currency managed to derive short-term support from the release.
In a wider picture, EURUSD remains vulnerable to further losses, and the inability to make a decisive break above the 1.09 handle confirms that the downside risks persist, at least in the short term. a daily close under this level could send the European currency below the 50-daily moving average. Still, should positive risk sentiment persist, the selling pressure surrounding the pair will be limited. On the upside, the prices need to overcome the 100-daily moving average around 1.0960 in order to proceed to a more sustainable and robust recovery. Once above this level, the pair will retarget the 100-DMA that arrives marginally above the 1.10 figure.