- EUR/USD licks its wounds above 1.1200 but remains vulnerable.
- Hawkish Fed, European covid curbs will continue to undermine EUR/USD.
- Downside risks remain intact while below 21-SMA on the 4H chart.
EUR/USD is advancing above 1.1200, on a steady recovery from the 2021 lows of 1.1186. The US dollar retreats in tandem with the Treasury yields despite a cautious mood on Thanksgiving Day.
The European covid curbs and the Fed-ECB policy divergence is expected to keep the euro on the edge ahead of the ECB minutes and speeches from several ECB policymakers, including President Christine Lagarde.
After Austria announced a nationwide lockdown last week, France is set to announce new covid measures, as the government spokesperson warned the country's Covid-19 incidence rate is likely to rise past 200 per 100K in the next few days.
Meanwhile, reports are doing rounds that Germany is set to decide on tougher Covid-19 restrictions and could even opt for a full lockdown amid record daily infections and mounting pressure on hospitals.
On the USD side of the story, hawkish comments from the Fed official Mary Daly combined with the Fed minutes showing preference to a faster pace in tapering and earlier rate hikes will continue to underpin the shorter duration yields and, in turn, the dollar.
Looking at EUR/USD’s four-hour chart, the downside bias remains intact so long as the price holds below the downward-sloping 21-Simple Moving Average (SMA) at 1.1239.
At the time of writing, the spot is trading at 1.1214, up 0.16% on the day. A four-hourly candlestick closing above the 21-SMA is needed to unleash the additional recovery towards 1.1300.
The Relative Strength Index (RSI) is trading flat just above the oversold territory, suggesting that the downside bias remains intact.
EUR/USD: Four-hour chart
On the flip side, the 2021 lows will get retested on selling resurgence, below which the falling trendline support at 1.1175 will be on the sellers’ radars.
Further down, the 1.1150 psychological barrier will come into play.
EUR/USD: Additional levels to consider
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