EUR/USD preserved its recovery momentum early Friday and rose above 1.1250 during the European trading hours. Markets are doubting the Fed's policy tightening prospects as the new coronavirus variant revives concerns over the economic recovery losing steam. There won't be any high-tier macroeconomic data releases and investors will keep a close eye on coronavirus headlines. Although the greenback is likely to outperform the risk-sensitive currencies, it could find it difficult to gather strength against the common currency with market participants refraining from pricing the policy divergence between the Fed and the European Central Bank (ECB). Reports suggesting that the current vaccines might be ineffective against the heavily-mutated new coronavirus variant detected in South Africa are forcing investors to reassess the Federal Reserve's policy outlook.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

Indeed, several European countries continue to report a fast rebound in COVID cases and open the door to fresh lockdown measures in the very near term and with the main impact expected on the economic activity just ahead of the Christmas festivities.

There is an obvious bullish shift in EUR/USD's near-term technical outlook. The Relative Strength Index (RSI) indicator advanced beyond 50 for the first time in a week and the pair is holding above the 20-period SMA.

Currently, the pair is testing the 50-period SMA at 1.1280 and additional gains toward 1.1300 (psychological level) could be witnessed. In case buyers manage to flip the latter into support, next resistance aligns at 1.1370 (static level).

On the downside, supports are located at 1.1230 (20-period SMA), 1.1200 (psychological level) and 1.1185 (2021 low).

EURUSD Dominated By Covid-19 Situation

Nov 26 2021