Persisting worries about the surge in coronavirus cases add to the safe-haven dollar demand
The euro came under pressure on Monday, extending losses today as the dollar bounced from fresh lows to shift into a recovery mode. EURUSD edged lower to the 1.2055 area where the 100-DMA lies.
Following yesterday’s rally to fresh two-month tops beyond 1.2100, the pair lost upside momentum to come under some selling pressure that brought the prices back to the 100-DMA. As such, the short-term technical picture has deteriorated, with the daily RSI reversing south in the neutral territory amidst the resurgence of the demand for the greenback.
Persisting worries about the surge in coronavirus cases in some regions, particularly in Asia, are putting global stocks under pressure thus adding to the safe-haven dollar demand. The steady performance of US yields supports dollar recovery as well.
Also, traders are getting more cautious ahead of a two-day Federal Reserve meeting that concludes on Wednesday. The central bank is widely expected to leave rates unchanged while the tone from Powell could add to positive momentum surrounding the greenback if the Governor strikes a slightly more hawkish tone when speaking on the outlook for the central bank’s monetary policy.
In this scenario, the EURUSD pair could see more losses in the coming days and derail the 1.2000 figure to retarget the 20-DMA. However, it looks like Powell will prefer more cautious rhetoric, so downside risks for the common currency could be limited in the context of the upcoming event.
In the immediate term, the pair needs to hold above the mentioned 100-day moving average in order to stay afloat and regain upward momentum eventually. Otherwise, the euro could threaten the 1.2000 mark. On the positive side, the common currency derives support from the fact that that the vaccine campaign appears to have gained some serious pace in Europe.