Risky assets demand reemerged, sending the safe-haven greenback lower to start the week
The dollar came under the renewed selling pressure on Monday after Trump signed the $2.3-trillion-dollar coronavirus relief and government funding bill into law, averting a government shutdown. He also noted that he signed the coronavirus relief bill only after securing a commitment for the Senate to consider legislation to increase stimulus checks from $600 to $2,000.
Against this backdrop, risky assets demand reemerged, sending the safe-haven greenback lower to start the week. EURUSD has recovered back above the 1.2200 figure, having climbed to the 1.2240 area in recent trading. In a wider picture, the common currency continues to hold above the ascending 20-DMA while staying within a strong uptrend and just marginally below long-term tops registered around 1.2270.
USDJPY, meanwhile, remains capped by the descending 20-DMA that has been acting as resistance since mid-November. On Monday, the pair has settled in a tight range around 103.50, with downside risks persisting as long as the prices stay below the mentioned moving average. Furthermore, the 20-weekly MA has been capping the upside potential since June, adding to the bearish picture surrounding the dollar.
As the dollar retreated, gold prices briefly jumped to the $1,900 figure earlier in the day. However, the precious metal failed to preserve gains and retreated ahead of the opening bell in Europe. As of writing, the bullion was changing hands around $1,883, unchanged on the day. On the downside, the immediate support now arrives at $1,870. Meanwhile, the 100-DMA that arrives marginally below $1,900 acts as the nearest upside target.
In general, the greenback will likely remain on the defensive in the short term if the risk-on tone persists in the global financial markets. Furthermore, the USD could extend the decline in 2021 amid vaccination, the economic recovery from the pandemic, and the Federal Reserve’s dovish monetary policy.