EUR/USD: 1.23 emerges as resistance ahead of Georgia runoff elections

• EUR/USD struggles to establish a foothold above 1.23. 
• Technical studies and market positioning show scope for a pullback. 
• Democratic sweep in Georgia elections could bring stronger buying pressure.

EUR/USD failed to keep gains above 1.23 for the third consecutive trading day on Monday. 

The repeated rejection above the psychological level, coupled with the bearish divergence of the 14-day Relative Strength Index (RSI) and the negative or bearish reading on the daily chart MACD histogram suggests scope for a pullback. 

Market positioning validates the technical picture. "The latest IMM data show net dollar shorts climbed to $30.4 billion in the week ended Dec. 29 while net EUR/USD longs stood at $21.875 billion, reflecting the market's view that the trend will continue in 2021," according to Reuters. 

As such, 1.23 is now the level to beat for the bulls. The breakout could happen if Democrats sweep the Georgia elections for both Senate seats due on Tuesday. That's because a Democrat-controlled Senate could pave the way for more significant fiscal stimulus, according to Goldman Sachs. Further, the market is currently pricing a Republican win in at least one race.

Data-wise, the focus would be on the German Unemployment Rate, due at 08:55 GMT, and the US ISM Manufacturing, scheduled for release at 15:00 GMT. 

At press time, the pair is trading near 1.2272, representing a 0.19% gain on the day. The dollar came under pressure in Asia after the US Food and Drug Administration said that two different mRNA vaccines now show remarkable effectiveness of about 95% in preventing Covid-19 infection in adults. 

Technical levels