The common currency keeps bleeding despite a rally in stocks and a further improvement in risk sentiment across the markets
The euro remains under the selling pressure on Tuesday, losing ground since another rejection from the descending 20-DMA that has been acting as resistance for nearly a month already. EURUSD dipped to fresh 2021 lows below 1.2050 in recent trading, threatening the 1.2000 psychological level during the European hours.
Interestingly, the common currency keeps bleeding despite a rally in stocks and a further improvement in risk sentiment across the markets. The euro was also unfazed by the latest statement from Ursula Von der Leyen even as the President of the European Commission confirmed today that 300 million doses of Pfizer, Moderna, and AstraZeneca vaccines will arrive in Europe in the second quarter.
Meanwhile, the Eurozone economy contracted 0.7% on quarter in the three months to December, beating -1.2% expected. Still, the euro failed to capitalize on the release. In part, this is due to the fact that the ongoing restrictions will likely trigger another contraction in the economy this quarter, and that sets up a likelihood of a double-dip recession to follow.
Besides, dollar demand persists despite risk-on sentiment, with the USD index climbing to seven-week highs in recent trading as Biden and Senate Republicans hold a lengthy meeting on coronavirus relief bill. The rising dollar sent gold prices lower as well, with the precious metal flirting with the 200-DMA again following a rejection from local highs around $1,875 late last week.
Against this backdrop, EURUSD slid to two-month lows around the 1.2030 area, a break below which would pave the way toward the 1.2000 mentioned level that could act as support and trigger a bounce if the downside pressure eases somehow in the short term. If so, the euro will first need to overcome the 1.2050 zone in order to regain the 1.2100 figure and retarget the key resistance represented by the 20-daily moving average, today at 1.2147.