The dollar is falling across the board on Wednesday as optimism surrounding the coronavirus vaccine overshadowed concerns over rising cases and rising tensions between the US and China. Risk mood improved substantially following the reports that Moderna’s vaccine led patients to produce antibodies that can neutralize the coronavirus that causes thedisease. There is also progress in the initial trials of the Oxford Covid-19 vaccine that has been backed by AstraZeneca.
As a result, high-yielding assets surged while the safe-haven greenback came under widespread selling pressure despite virus cases and the death toll continued to rise in several states. EURUSD climbed to 1.1450 and remains on the offensive, rising since last Friday. The euro derived the additional support from upbeat comments on the European recovery fund, with the EU leaders reaching a compromise on the recovery fund ahead of negotiations on 17-18 July.
GBPUSD rallied above 1.26 after yesterday’s plunge to one-week lows below 1.25. Of note, the pair created a long lower wick on the intraday timeframes on Tuesday and finished unchanged, erasing earlier losses. This pattern suggests the downside risks for the pound are limited at the moment. At the time of writing, the prices were holding around 1.2630 but the cable is yet to confirm a comeback above the 1.26 barrier on a daily closing basis. As for the data, the UK CPI came in better than expected in June but still well below the Bank of England’s target of 2%.
Meanwhile, USDJPY failed to regain the 20-daily moving average and plunged below 107.00. As a result, the pair turned negative on the weekly charts, struggling to stage a sustainable recovery above the key moving averages. Interestingly, the pair has been under the negative pressure despite upbeat risk sentiment, suggesting yen demand persists amid the lingering concerns over the US-China relations and virus developments in several countries. In the short term, the greenback needs to turn the 107.00 handle into resistance in order to trim recent losses and avoid a deeper retreat.