The euro’s bullish potential is limited amid the renewed lockdowns in Europe
The US dollar has been rising these days, having accelerated the ascent on Thursday as traders move back into the greenback amid a deep risk aversion across the global financial markets. Investor sentiment turned sour amid the renewed lockdown in European countries amid a second wave of the Covid-19 pandemic as well as fading hopes for a US stimulus bill amid the upcoming presidential election.
Against this backdrop, negative risk sentiment sent the safe-haven US currency higher. USDJPY derived support from the 105.00 area and switched into a recovery mode. As of writing, the pair was changing hands around 105.25, refraining from challenging the 20-DMA that arrives at 105.40 today. However, the recovery momentum looks unsustainable, and the dollar could reverse lower if risk aversion continues to intensify, fueling yen demand as the Japanese currency remains more a more attractive safe-haven currency especially amid the heightened political uncertainty in the US.
Meanwhile, EURUSD slipped to the 1.17 level and could threaten this support zone if risk aversion continues in the short term. In a wider picture, the euro’s bullish potential is limited amid the renewed lockdowns in Europe, threatening to cause a deeper economic crisis because of the ongoing pandemic. Most governments are trying to avoid total lockdowns, but risks on this front could increase amid rising coronavirus cases in the region. Should the downside pressure persist, the common currency could target the 1.1610 area last seen in late-September.
Elsewhere, the resurgent greenback demand capped timid bullish attempts in the gold market. The precious metal is back under the selling pressure, struggling to regain the descending 20-DMA and the $1,900 psychological level. On the other hand, as long as the bullion remains above the 20-week SMA, further downside potential looks limited. Despite negative risk sentiment, the path of least resistance for gold is to the downside.