- EUR/USD witnessed a subdued/range-bound price action on the first day of a new week.
- Concerns about the third wave of COVID-19 infections weighed on the common currency.
- The upbeat market mood undermined the safe-haven USD and helped limit the downside.
The EUR/USD pair seesawed between tepid gains/minor losses through the mid-European session and remained confined in a narrow trading band around mid-1.1700s.
A combination of diverging forces failed to provide any meaningful impetus to the major and led to a subdued/range-bound price action through the first half of the trading action on Monday. Worries about the economic fallout from the third wave of COVID-19 infections in Europe kept the euro bulls on the defensive and capped the upside for the EUR/USD pair.
Investors remain concerned that pandemic-related restrictions in Europe could derail the fragile economic recovery amid the slow pace of vaccinations. In the latest sign of the region’s struggles to keep the coronavirus pandemic in check, France announced late on Wednesday it would widen lockdown measures to the entire country starting Saturday.
However, a softer tone surrounding the US dollar extended some support to the EUR/USD pair and helped limit any deeper losses amid relatively thin liquidity conditions. As investors looked past Friday’s blockbuster US monthly jobs report (NFP), the upbeat market mood was seen as a key factor that undermined demand for the safe-haven greenback.
That said, the optimistic outlook for the US economy and a modest pickup in the US Treasury bond yields should continue to attract some USD dip-buying. This, in turn, suggests that the path of least resistance for the EUR/USD pair remains on the downside and any attempted recovery move might still be seen as an opportunity for bearish traders.
The impressive pace of coronavirus vaccinations and the Biden administration’s planned stimulus of more than $2 trillion has raised expectations for a relatively faster US recovery from the pandemic. This, along with speculations for an uptick in US inflation, pushed the yield on the benchmark 10-year US government bond back above the 1.70% threshold.
Market participants now look forward to the US ISM Services PMI for a fresh impetus for reaffirmation of a solid US economic rebound from the coronavirus shock. The key focus, however, will be on FOMC meeting minutes and a scheduled speech by Fed Chair Jerome Powell on Wednesday and Thursday, respectively, which influence the near-term USD price dynamics.
Technical levels to watch
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