- EUR/USD regained positive traction on Monday amid a broad-based USD weakness.
- The upbeat market mood, hopes for more US stimulus weighed heavily on the buck.
The EUR/USD pair held on to modest intraday gains through the mid-European session and was last seen trading near the top end of its daily range, comfortably above mid-1.2100s.
Following the previous session’s modest pullback to the 1.2100 mark, the pair regained positive traction on the first day of a new trading week and was supported by sustained US dollar selling bias. The latest optimism over the rollout of vaccines for the highly contagious coronavirus disease remained supportive of the upbeat market mood, which, in turn, undermined the greenback’s safe-haven demand.
Apart from this, renewed hopes that the UK and the EU will reach a free trade agreement before the end of Brexit transition period provided an additional boost to the already strong global risk sentiment. Apart from this, expectations for additional US fiscal stimulus further contributed to the heavily offered tone surrounding the buck and dragged the USD Index to fresh two-and-half-year lows, around mid-90.00s.
A bipartisan bill for a $908 billion COVID-19 relief package – set to be introduced in the US Congress later this Monday – will reportedly be split into two separate packages in order to maximize the chances of its approval. Investors also seemed concerned about the potential economic fallout from the continuous surge in new coronavirus infections and the imposition of new restrictions in several US states.
Meanwhile, the shared currency seemed rather unaffected and largely shrugged off reports that the Netherlands will announce stricter lockdown measures to contain the ever-increasing coronavirus cases. The lockdown starts at midnight and will remain in place until January 19. Dutch Prime Minister Mark Rutte will speak to the nation at 18:00 GMT, though is unlikely to be a major game-changer for the EUR/USD pair.
In the absence of any major market-moving economic releases from the US, the US stimulus headlines and the broader market risk sentiment will play a dominant role in influencing the USD price dynamics. This should assist traders to grab some short-term opportunities. That said, investors might refrain from placing aggressive directional bets rather prefer to wait for this week’s FOMC policy decision.
Technical levels to watch
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