EUR/USD Outlook: Next relevant target for bears is pegged near 1.1930 area

• EUR/USD witnessed some follow-through selling for the second straight session on Tuesday.
• A strong pickup in the US bond yields underpinned the USD and exerted pressure on the pair.
• The risk-on mood capped gains for the safe-haven greenback and helped limit the downside.

The EUR/USD pair struggled to capitalize on its early uptick to the 1.2100 neighbourhood, instead met with some fresh supply and dropped to two-month lows on Tuesday. The shared currency was weighed down by concerns that the slow rollout of COVID-19 vaccines in Europe could hamper the economic recovery. On the economic data front, the prelim Eurozone GDP report showed that the economy contracted by 0.7% during the October-December period. The reading was less worse than the 0.9% drop anticipated but marked a sharp slowdown from the downwardly revised 12.5% growth recorded in the previous quarter and did little to impress bulls.

On the other hand, signs of progress towards additional US stimulus measures triggered a fresh leg up in the US Treasury bond yields and helped revive the US dollar demand. This, in turn, was seen as another factor that exerted some additional downward pressure on the major. Democrats in the US Congress took the first steps toward advancing President Joe Biden's proposed $1.9 trillion COVID-19 relief package without Republican support. Democrats opened debate on a fiscal 2021 budget resolution with coronavirus aid spending instructions, unlocking a legislative tool to pass stimulus spending amid Republican opposition.

Meanwhile, renewed optimism over a massive US economic stimulus lifted hopes for a strong global economic recovery. This, along with positive news related to the development of another COVID-19 vaccine, boosted investors' appetite for riskier assets. Reuters reported on Tuesday – citing the peer-reviewed trial data – that the Sputnik V coronavirus vaccine developed in Russia showed an effectiveness rate of 91.6% in the phase-3 trial. The risk-on flow was seen as the only factor that kept a lid on any further gains for the greenback and assisted the pair to find some support ahead of the key 1.2000 psychological mark.

The pair finally settled around 30 pips off daily lows, albeit lacked any follow-through buying and remained confined in a range through the Asian session on Wednesday. Market participants now look forward to the release of the final Eurozone Services PMI prints for a fresh impetus. Later during the early North American session, the release of the US ISM Services PMI will influence the USD price dynamics and further produce some trading opportunities. Apart from this, traders will also take cues from developments surrounding the coronavirus saga, US stimulus headlines and the broader market risk sentiment.

Short-term technical outlook

From a technical perspective, the overnight break through the 1.2060-55 strong horizontal support might have already set the stage for a further near-term depreciating move. Subsequent weakness below the 1.2000 mark will add credence the negative outlook and turn the pair vulnerable to accelerate the slide towards the 1.1930 resistance-turned-support zone.

On the flip side, attempted recovery move might now confront stiff resistance near the overnight swing highs, around the 1.2085-90 region. Any further positive move beyond the 1.2100 mark is more likely to be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 1.2140-50 supply zone. Only a sustained breakthrough the mentioned resistance levels will negate the bearish bias and allow the pair to resume its prior/well-established near-term uptrend.