The EUR/USD pair kicked off the new week on a positive note and climbed to over two-month tops, around the 1.1920 region, albeit struggled to capitalize on the move. Joe Biden’s victory in a nail-biting U.S. presidential election kept the U.S. dollar bulls on the defensive, which was seen as a key factor behind the early uptick.
Adding to this, a promising development over a potential vaccine for the highly contagious coronavirus disease provided an additional boost to the already upbeat market mood.
This was seen as a major victory in the fight against the highly contagious disease and revived hopes for a swift global economic recovery. The strong risk-on flow triggered a massive rally in the US Treasury bond yields, which, in turn, prompted investors to unwind their bearish USD positions and exerted some pressure on the major.
The pair dived around 125 pips from daily swing highs and momentarily slipped back below the 1.1800 mark, though showed some resilience at lower levels. The latest optimism turned out to be short-lived and was evident from a pullback in the equity markets. Investors remain sceptic about the efficacy and the length of immunity provided by the vaccine.
From a technical perspective, the overnight sharp retracement might have turned the recent move beyond a two-month-old trading range as a false breakout. That said, it will still be prudent to wait for some follow-through selling below the 1.1800-1.1795 region before confirming that the pair might have topped out in the near-term. The pair might then turn vulnerable to accelerate the slide back towards testing the 1.1700 mark. The downward trajectory could further get extended towards 100-day SMA support, currently near the 1.1650-45 region.
On the flip side, the 1.1855-60 region, which is closely followed by the 1.1880-85 support zone might now act as immediate resistance. A sustained strength beyond, leading to a subsequent move above the overnight swing high, around the 1.1920 region, has the potential lift the pair beyond the 1.1945-40 supply zone, towards reclaiming the key 1.2000 psychological mark.
Original analysis: https://www.fxstreet.com/analy...