EUR/USD sidelined after biggest single-day loss since April 2

• EUR/USD trades flat around 1.1795 after Friday’s 0.78% decline. 
• The oversold dollar may draw haven bids due to fiscal impasse in Washington.
• Friday’s slide confirmed a bearish reversal on the daily chart. 

EUR/USD is lacking a clear directional bias on Monday, having declined by 0.78% on Friday to register its biggest single-day decline in over four months. 

Dollar oversold

The American dollar is at its most oversold level in over 40 years, according to Morgan Stanley, The investment bank said on Friday that it has ditched its dollar-bearish stance and turned tactically neutral on the greenback, according to Reuters. 

The dollar index, which tracks the value of the greenback against majors, fell to a 26-month low of 92.52 last week. At press time, the index is seen at 93.34 – down over 9% from the high of 102.99 seen in March. 

Technical indicators like the 14-day relative strength index and slow stochastic are reporting oversold conditions. As such, a notable bounce could be seen in the short-term – more so, as global equities are looking overvalued and due for a pullback. Potential losses in stock markets will likely bode well for the safe-haven US dollar. 

• EUR/USD Price Analysis: Interim top in place?

Focus on US stimulus

Frustrated by the deadlock in Washington over an additional coronavirus support package, President Trump on Saturday signed executive orders partly restoring enhanced unemployment payments to the tens of millions of Americans who lost jobs in the pandemic. The orders would provide an extra $400 per week in unemployment benefits – $200 less than the $600 per week paid earlier in the crisis, as noted by Reuters report. 

The US House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin said on Sunday that they were willing to resume stimulus negotiations. 

The risk sentiment may take a hit if the deadlock persists, putting a haven bid under the greenback. According to analysts at JP Morgan, the market will have to face a wave of GDP downgrades, a rise in unemployment and lower consumer spending if the White House postpones negotiations until after Presidential Elections. 

Technical levels