EUR/USD Analysis: Bulls manage to defend 1.10 level, at least for now

The selling pressure around the shared currency remained unabated on the first day of a new trading week and dragged the EUR/USD pair to fresh multi-week lows, closer to the key 1.10 psychological mark. The pair remained depressed for the third consecutive session and was further pressurized by the German IFO Survey results, which showed that the Business Climate deteriorated to 95.9 in January from 96.3 previous.

On the other hand, the US dollar benefitted from the prevailing risk-off environment amid intensifying worries over the spread of the deadly coronavirus. Meanwhile, the anti-risk flow led to an intraday slump in the US Treasury bond yields, which eventually kept a lid on the USD appreciating move. In fact, the yield on the benchmark 10-year Treasury note slipped to its lowest level since October 10 and the 2-year note rate fell to a more than three-month low.

This coupled with a surprise drop in US new home sales failed to impress the USD bulls and helped ease the bearish pressure surrounding the major. The Commerce Department reported on Monday that new home sales fell 0.4% to a seasonally adjusted annual rate of 694,000 units in December, well below the 1.5% rise expected. The pair managed to find some support near the 1.10 area and edged higher during the Asian session on Tuesday.

There isn't any major market-moving economic data due for releases from the Eurozone. Later during the early North-American session, the US Durable Goods Orders data will influence the USD price dynamics. This will be followed by the Conference Board's Consumer Confidence Index, which might further contribute towards producing some meaningful trading opportunities ahead of the latest FOMC monetary policy update, scheduled to be announced on Wednesday.

Short-term technical outlook

From a technical perspective, the pair seems to have found some support near the 61.8% Fibonacci level of the 1.0879-1.1239 positive move. Heading into Wednesday’s key event risk, bearish traders are likely to wait for a sustained weakness below the mentioned support before positioning for any further near-term depreciating move. Some follow-through selling below the November swing lows support near the 1.0980 region will reinforce the negative outlook and accelerate the slide back towards the 1.0900 round figure mark.

On the flip side, the 1.1060 region (50% Fibo. level) now seems to act as immediate strong resistance. Any subsequent recovery attempt is more likely to confront some heavy supply, rather remain capped near the 1.1090-1.1100 confluence region – comprising of 38.2% Fibo. level and a 3-1/2-month-old ascending trend-line support breakpoint.