EUR/USD sellers flirt with 1.1800 as risk aversion backs USD bulls

• EUR/USD prints three-day downtrend, stays pressured around intraday low.
• Risk appetite worsens on the covid concerns, doubts over Fed’s next moves.
• US-China tussles, pre-ECB mood also weigh on the quote.
• German Buba Monthly Report, risk catalysts will be crucial for near-term direction.

EUR/USD edges lower around 1.1800, down for the third consecutive day, heading into Monday’s European session. The coronavirus-led risk-off mood put a safe-haven bid under the US dollar amid a sluggish Asian session.

Not only the escalating covid numbers but fears of the virus variant spreading faster, also resisting vaccines, push global policymakers towards a rethink of the COVID-19 battle. While Australia fastens jabbing and is up for extending the local lockdowns, the UK braces for “Freedom Day” and gets criticized at home and abroad.

It’s worth noting that the gradually firming up US-China tussles also drown the EUR/USD prices. The US Congress recently passed a bill “to bolster American research and development would bar scientists and academics from participating in U.S.-funded research projects if they are also receiving support from Beijing,” per Bloomberg. On the same line, US Treasury Secretary Janet Yellen said, “China trade deal has hurt American consumers, per New York Times (NYT).

Elsewhere, doubts over the European Central Bank’s (ECB) next moves after showing readiness to accept above-target inflation, as well as the Federal Reserve’s (Fed) expectedly hawkish moves, despite policymakers’ rejection, add burden on the EUR/USD. On Friday, US consumer-centric data came in mixed, mostly soft, but the details suggested stronger inflation expectations and favored the US dollar.

Amid these plays, the US Dollar Index (DXY) prints a three-day uptrend around 92.73 by the press time. Also portraying the risk-off mood could be the downbeat S&P 500 Futures and Asia–Pacific shares.

Looking forward, EUR/USD traders will keep their eyes on the sentiment-related headlines amid a lack of major data/events. Further, statements from Germany’s Buba report will also be important as Berlin backs the monetary policy adjustments to tame the hot inflation issue at hand.

Technical analysis

Although a sustained trading below 200-DMA, around 1.2000, keeps EUR/USD sellers hopeful, the monthly low near 1.1770 and a one-month-old descending support line around 1.1700 challenge the pair’s further downside.