EUR/USD: Bounce from recent lows looks to have ended
- EUR/USD dropped on Monday, ending a corrective bounce from six-week lows.
- The single currency looks south on weak German data, virus concerns.
- Risk sentiment has weakened on worries about US fiscal stimulus.
EUR/USD's bounce from six-week lows may have run out of steam, and the currency pair face more substantial selling pressure in the near-term.
"Euro's decline from 1.2183 to 1.2117 on weak German IFO data [released on Monday] suggests early correction from last Monday's 6-week bottom at 1.2055 has possibly ended at 1.2190 (Friday)," analysts at AceTrader said in their daily recommendations note.
Germany's IFO Expectations index decreased to 91.1 in January, missing the consensus forecast of 93.2 and signaling pessimism in the German business community amid the resurgence of the coronavirus crisis.
As such, EUR/USD suffered losses on Monday despite the six basis point drop in the US 10-year Treasury yield. The currency pair remains sidelined near 1.2140 at press time, alongside losses in the US stock futures.
Concerns about new strains of the deadly virus and skepticism about the new US President Joe Biden's ability to get the $1.9 trillion fiscal stimulus plan approved by Congress have weakened the risk sentiment.
These factors, coupled with the Italian political uncertainty and relatively low Eurozone inflation expectations, could weigh over the common currency.
A close under 1.2117 would confirm a reversal lower and pave the way for a re-test of 1.2077-1.2055, according to AceTrader. Both the Eurozone and the US data calendar is light on Tuesday, which leaves the pair at the mercy of the broader market sentiment.
Technical levels