EURUSD has been trending lower for the third consecutive day on Tuesday
The dollar retains bullish bias on Tuesday as US Treasury yields stay elevated around the 1.6% handle despite the recent retreat from more than one-year highs. The safe-haven greenback demand persists amid reports about a third coronavirus wave in Europe, suggesting fresh lockdowns on the horizon. Furthermore, a number of European countries have suspended the use of AstraZeneca’s COVID-19 vaccine over safety fears. These developments in the region continue to dent the appeal of the euro, adding to the bullish impetus surrounding the dollar.
As such, EURUSD has been trending lower for the third consecutive day on Tuesday while still holding above the 1.1900 figure as the selling pressure looks limited for the time being. The common currency remains relatively resilient against the dollar despite the European Central Bank’s pledge to up its purchases of bonds to counter rising yields.
Now, market attention is shifting to the upcoming FOMC monetary policy meeting that concludes on Wednesday. The meeting will include updated projections and a new dot plot. However, the focus of this week’s meeting is how the central bank would respond to the rising Treasury yields. The Fed officials could attribute this rise to better economic developments and stronger market confidence. All the monetary policy measures are expected to stay unchanged at the meeting while the overall tone will likely be cautious. In a neutral scenario, the market reaction to the meeting will likely be muted.
In the short term, the euro needs to stay above 1.1900 in order to stage a bounce towards the 1.2000 handle. However, the path of least resistance for the EURUSD pair remains to the downside at this stage despite the prices climbed back to flat-line in recent trading. On the weekly timeframes, the European currency continues to retreat from long-term highs registered around 1.2350 in January.