EUR/USD: risk-off sentiment drives pair down
What happened?
The new Covid-19 strain has been found in the United Kingdom. The new virus variant appears to be 70% more contagious than other strains. The market sentiment immediately worsened after the report. As a result, investors poured their capital into safe-haven assets like the USD, the JPY, and the CHF. The USD was the number one reserve currency this year. It has started to lose its dominancy due to the vaccine rollout and the global recovery. However, fears of the new wave of stricter global lockdowns increased the demand for the USD.
Forecast
"With EUR/USD already pressuring key tactical support near 1.2175, if this fails to hold, the bulls may beat a retreat to the key 1.2000 area," says Saxo Bank.
Technical tips
EUR/USD dropped enormously yesterday. However, the 50-period moving average at 1.2165 limited the further falling. If the pair plummets below the psychological mark of 1.2200, the way down to the 50- moving average of 1.2180 will be open. However, the pair shouldn’t cross this strong support as it has failed to break through the 50-period MA many times since early November, that’s why we can expect the pullback to the upside. Resistance levels are 1.2240 and 1.2270.
