A better risk sentiment makes the dollar stay on the defensive on Monday, with traders continue to digest Powell's dovish comments from Friday and cheer the positive background on the trade front. As such, EURUSD further gains ground though the moves are still limited by a range of 1.13-1.15 which looks like a battleground for bears and bulls.
The Chinese foreign ministry spokesman Lu Kang reported that China is willing to resolve trade disputed with the US on equal footing. In this context, the World Economic Forum could draw investor attention. The event is scheduled to take place on 22 to 25 January in Davos, Switzerland. Trump and some Chinese officials will attend the forum, and markets will hope that some talks will take place, though it’s unlikely to happen. So far, the positive comments are enough to fuel investor optimism and support high-yielding currencies including the euro.
Another meaningful bullish factor for the single currency is the dollar widespread weakness amid further signs that the Fed will take a pause. Following Powell's comments on Friday, markets are already not pricing in any rate hikes this year and it’s now very likely that the central bank will sit on its hands at least during the first quarter. Further expectations will depend on the incoming economic data.
Technically, EURUSD is still stuck in the 1.13-1.15 range, with the immediate resistance levels come at 1.1450, 1.1476, where the 100-DMA lies, and 1.15. The 1.15 barrier remains the local ceiling for the pair at this stage and as long as the price is below this handle, there is a correction risk. However, considering the souring dollar sentiment, the balance of risks for EURUSD are clearly skewed to the upside, while the bearish potential is limited.