Rising oil prices adding to the negative tone surrounding the American currency
The dollar stays under the selling pressure against its major counterparts on Monday as positive risk sentiment pushes the safe-haven greenback lower nearly across the board. Global investors continue to bet on further progress in vaccination, stimulus, and economic recovery. Against this backdrop, global stocks extend the rally despite the overbought conditions, with rising oil prices adding to the negative tone surrounding the American currency.
The USD index continues to trade above the 90.30 support at the start of the week, and the short-term technical outlook for the dollar remains tilted to the downside even as the US to-year Treasury yields have recovered somehow recently. Due to the Presidents’ Day holiday on Monday, the greenback is expected to stay under pressure in the near term ahead of key economic data due later this week including the FOMC meeting minutes due on Wednesday.
As for individual currency pairs, EURUSD stays in the green today but struggles to overcome the 1.2150 local resistance while deriving support from the 20-DMA, today at 1.2120. The upside potential in the common currency is capped by the regional events for now. In particular, according to the official report, Eurozone industrial production contracted by 1.6% on a monthly basis in December following an expansion of 2.6% in the previous month while analysts expected the output to contract by just 0.6%.
On the positive side, however, the trade surplus in December widened to 29.2 billion euros from 25.7 billion euros, exceeding expectations for a surplus of 25.3 billion euros. Meanwhile, the German Economy Ministry said in a statement earlier today that the extension and tightening of coronavirus restriction measures will continue to weigh on the economy in the first quarter of 2021.
In the immediate term, the EURUSD pair will likely hold above the mentioned moving average but the euro would need the additional bullish impetus to overcome the 1.2150 resistance that stands on the way toward the 1.2200 figure last seen one month ago.