EUR/USD Analysis: Recent corrective bounce falters ahead of 1.0900 mark

• Broad-based USD weakness helped EUR/USD to gain some traction on Tuesday.
• Fed rate cut speculations, slump in the US bond yields undermined the greenback.
• Coronavirus concerns kept a lid on any further positive move beyond 1.0900 mark.

Following an early dip to the 1.0830 region, the EUR/USD pair caught some fresh bids and turned higher for the third straight day on Tuesday. The uptick, also marking its fourth day of a positive move in the previous five, was primarily sponsored by some renewed US dollar selling since the early US trading session. Risk aversion continued to dominate the financial markets amid concerns over the global outbreak of the deadly coronavirus and its impact on the world economy, which forced investors to take refuge in the so-called safe-haven assets.

The global flight to safety led to a plunge in the US Treasury bond yields – dragging the benchmark 10-year bond yield to fresh all-time lows – and prompted some follow-through USD long-unwinding. Meanwhile, worries that the potential impact on global growth from the Novel coronavirus will be worse than expected further fueled speculations that the Fed would cut interest rates sooner rather than later and exerted some additional downward pressure on the greenback. The key US Dollar Index fell to 12-day lows, below the 99.00 mark, and was further pressurized by softer domestic macro data.

In fact, the Richmond Fed Manufacturing Index dropped to -2 February as compared to the consensus estimates pointing to a pullback to 13 from the previous month's reading of 20. Adding to this, the Conference Board's Consumer Confidence Index also fell short of market expectations and came in at 130.7 from the previous month's downwardly revised reading of 130.4 (131.6 reported earlier).

The pair finally settled near the top end of its daily trading range, albeit struggled to extend the momentum. Pessimism the coronavirus pandemic could hamper the Eurozone economic – in particular the export-driven German economy – kept a lid on any strong follow-through, rather prompted some selling during the Asian session on Wednesday. There isn’t any major market-moving economic due for release on Wednesday, either from the Eurozone or the US. Hence, market participants will keep a close eye on the latest developments around the coronavirus saga, which will continue to play a key role in producing some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the pair stalled its recent recovery move from YTD lows and failed ahead of the 1.0900 round figure mark. The mentioned handle should now act as a key pivotal point for short-term traders, above with a fresh bout of short-covering has the potential to lift the pair further towards an intermediate resistance near the 1.0955-60 supply zone en-route the key 1.10 psychological mark.

On the flip side, 1.0830 horizontal zone now seems to act as immediate support and is closely followed by the 1.0800 round-figure mark. Further down, the lower end of over one-year-old descending trend-channel – currently near the 1.0770 region – might help limit losses. That said, a convincing break through will confirm a fresh near-term bearish breakdown and set the stage for an accelerated downfall towards the 1.0700 round-figure mark.