- EUR / USD regained some traction on Monday, although it struggled to capitalize on the move.
- The risk climate undermined the safe haven USD and remained favorable to the upside.
- Investors are looking for key German macroeconomic data to build momentum ahead of the Jackson Hole Symposium.
The US Dollar took further selling pressure on the first day of a new trading week and helped EUR / USD gain positive traction. Global risk sentiment has been strongly reinforced by the positive news about a potential vaccine and treatment for the highly contagious coronavirus disease. The good mood in the market undermined the greenback’s relative safe-haven status and was seen as a key factor in the pair’s modest intraday rise.
The Financial Times reported that the Trump administration is planning to speed up an experimental COVID-19 vaccine developed by AstraZeneca and the University of Oxford for use in the United States ahead of the November 3 election. Adding to that, the United States Food and Drug Administration (FDA) said on Sunday that it had issued emergency clearance to use blood plasma from recovered patients to treat some patients with the COVID-19 virus.
Meanwhile, the USD’s intraday weakness remained limited as investors refrained from placing aggressive bets ahead of a speech by Fed Chairman Jerome Powell at the Jackson Hole Symposium later this week. This, coupled with a positive rebound in US Treasury bond yields, extended some additional support for the greenback and capped the pair, which instead led to an intraday pullback of around 65 pips. The pair eventually stabilized almost unchanged for the day, just below the 1.1800 mark.
On the trade front, the office of the U.S. Trade Representative said in a statement that the United States and China see progress in resolving issues in phase one of the trade agreement between the two countries. This move boosted investor confidence and helped the pair seize new offers in Tuesday’s Asian session. Despite price movements in both directions over the past 24 hours, the pair remains well constrained in last week’s trading range, awaiting the breakout.
Market players are now eagerly awaiting the release of the final version of German GDP for the second quarter of 2020 and the closely watched German Ifo confidence survey. A softer reading will be seen as the first signs that the eurozone’s economic recovery is losing momentum and paves the way for an extension of the recent corrective slide from two-year highs. Later, at the start of the North American session, the release of the Conference Board’s U.S. Consumer Confidence Index will also be reviewed for significant business opportunities.
Short-term technical outlook
From a technical perspective, nothing seems to have changed much and the pair is more likely to extend its price consolidation action. Therefore, any significant slide is more likely to find decent support near last week’s low, around the 1.1755 region. Some tracking weakness could make the pair vulnerable to accelerate the pullback to a test level below 1.1700, or monthly lows set on August 3.
On the other hand, the 1.1850-60 region now appears to have emerged as an immediate hurdle, above which the bulls should aim for a move beyond the 1.1900 mark. A subsequent positive move has the potential to lift the pair further towards the 1.1940-50 supply area, above which momentum could extend further towards the key psychological mark of 1.2000.