- EUR/USD was seen consolidating its recent losses to multi-month lows.
- The USD held near 4-1/2 month tops and kept the bulls on the defensive.
- Investors look forward to the German ZEW Survey for a fresh impetus.
The EUR/USD pair consolidated its recent losses to multi-year lows and remained confined in a narrow trading band on the first day of a new trading week. Relatively thin liquidity conditions amid the President’s Day holiday in the US held investors from placing any aggressive bets and led to a subdued/range-bound trading action on Monday. In absence of any fresh catalyst, the shared currency remained on the defensive on the back of growing pessimism about the Eurozone economic outlook, in particular the export-driven German economy – the region’s largest economy.
Bears maintain their dominant position
On the other hand, the US dollar held steady just below 4-1/2 month tops set on Friday, albeit lacked any firm directional bias and did little to provide any meaningful impetus to the major. The market reaction to the PBoC's latest stimulus measures turned out to be rather muted. However, concerns about the economic impact of the coronavirus outbreak in China continued lending some support to the greenback's relative safe-haven status against its European counterpart.
The pair continued with its struggle to register any meaningful recovery and remained depressed through the Asian session ahead of a highly watched German survey later this Tuesday. The German ZEW Economic Sentiment Index is expected to fall to 21.5 in February from 26.7 previous and the Current Situation index is also seen worsening to -10.3 from -9.5. A disappointing reading will further fuel speculations that the ECB monetary policy will have to remain accommodative for much longer and exert some fresh downward pressure on the common currency. From the US, the release of the Empire State Manufacturing Index might influence the USD price dynamics and further contribute towards producing some trading opportunities later during the early North-American session.
Short-term technical outlook
From a technical perspective, nothing seems to have changed much for the pair and the near-term bias remains tilted in favour of bearish traders. However, extremely oversold conditions warrant some caution before positioning for any further depreciating move. Meanwhile, immediate support is pegged near the 1.0800 round-figure mark and is followed by the lower end of a one-year-old descending trend-channel, currently near the 1.0785-80 region, which might help limit deeper losses, at least for now.
On the flip side, any attempted bounce might now confront some fresh supply near the 1.0870 level and should remain capped near the 1.0900-1.0910 region. That said, a sustained move beyond the mentioned barriers might trigger a short-covering move and lift the pair back towards a strong horizontal support breakpoint, now turned resistance near the 1.0980-75 region.
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