Despite the current ascent, the pair remains vulnerable to fresh losses after a pause
As risk sentiment has improved on Monday, the dollar started to ease and eased to its lowest levels on the day, sending the euro higher. EURUSD managed to regain the 20-DMA and climbed to intraday highs around 1.1760, reversing earlier move to the 1.1700 support zone.
The selling pressure around the greenback boosts demand for high-yielding currencies including the euro at the beginning of the week. However, the further ascent will depend on the incoming signals from the major central banks. Earlier in the session, ECB’s Luis de Guindos suggested the recovery in the region appears to have lost momentum while the European central bank’s governing council member Robert Holzmann said that more easing may be necessary if the coronavirus crisis worsens. At this stage, there is no need for more easing yet, he added. The remarks failed to affect the pair, with the euro holding steady at the top of its local trading range. Later today, ECB President Lagarde, Fed’s Powell and FOMC members including Williams, Harker, and Bostic are due to speak.
Despite the current ascent, the pair remains vulnerable to fresh losses after a pause as the recovery momentum in risk sentiment looks fragile. It is not surprising considering the persistent risks and the ongoing coronavirus pandemic that threatens economic activity globally. In other words, bearish risks are still there, and the greenback could resume the rally at any point, especially if Lagarde expresses a dovish tone on the economy and the situation surrounding COVID-19.
From the technical point of view, EURUSD needs to confirm a recovery above the mentioned moving average on a daily closing basis. Otherwise, the 1.17 support will come back into the market focus. The daily RSI is pointing just slightly higher, suggesting the common currency may lack bullish momentum to extend the current corrective movement. In the immediate term, the euro will hardly dare to challenge the 1.18 figure, with the next resistance coming at 1.1770.