The euro is little changed during the European hours, holding above the 1.12 handle for two weeks already. Despite this is a positive sign, signaling a limited downside pressure, the common currency lacks the upside momentum to challenge the recent three-month highs above the 1.14 handle registered last week.
Mixed risk tone acts as a bearish driver for the high-yielding euro as traders keep cautious amid worries about a second wave of coronavirus cases. The USD index continues its consolidation around the 97.00 handle, refraining from testing recent tops around 97.50. If the selling pressure surrounding the greenback reemerges any time soon, the common currency may retarget the 1.13 handle.
According to the latest reports, a senior German government official said that “real negotiations” on the EU recovery fund will start next week. However, the news headlines failed to inspire euro bulls as well as the regional stock markets that continue to tread water in the negative territory.
As the daily RSI continues to pull back from the overbought territory, EURUSD is expected to see a bearish bias in the short term. A similar index on the hourly charts shows a bearish bias while the prices are now back below the 50-SMA, suggesting the path of least resistance is to the downside for now.
There is also an element of uncertainty that caps the upside potential in the common currency. it’s not clear yet if the agreement will be reached during the European Council meeting due tomorrow. the upcoming event will likely determine further direction for the pair in the short term.
In a positive scenario, EURUSD may climb back above the 1.13 barrier and even challenge the 1.1350 intermediate resistance that is standing on the way towards the 1.14 handle. On the downside, a break below 1.12 could send the pair to the 1.11400 area that capped the upside impetus in late-March.