In the first half of the day on Tuesday, EUR/USD climbed above the 1.11 handle, mainly due to the unexpectedly upbeat ZEW survey out of Germany. However, a stronger dollar coupled with the prevailing risk aversion prevented the pair from turning bullish. The euro was rejected from local highs around 1.1120 and settled around 1.1080.
Rising concern over a new strain of coronavirus in China fueled risk off sentiment across the markets yesterday, and despite the panic has abated since then, investors remain cautious, which in turn keeps the common currency under pressure. In the short term, the pair will continue to follow risk trends as well as dollar dynamics. Also, traders start to shift focus to the upcoming ECB meeting. It is widely expected that the meeting will be a non-event this time, but the central bank’s tone may affect the short-term direction in the pair anyway.
From the technical point of view, EUR/USD is again stuck between the 200- and 100-DMAs, and the risk of a break below the latter is rising after the prices dipped back under the 1.11 handle which acts as the immediate resistance again. Should the selling pressure persist in the near term, the single currency may really threaten the 100-daily moving average which now comes at 1.1067.