EUR/USD looks to recapture 1.0600 ahead of key US/EU events

• EUR/USD is catching a fresh bid, as the US Dollar drops with Treasury yields.
• Risk sentiment remains tepid amid China’s covid woes, ahead of critical events.
• EUR/USD targets a rising channel upper boundary at 1.0635 on a sustained move above 1.0600.

EUR/USD is recovering ground above 1.0500, eyeing a sustained move above 1.0550 in the European session this Monday. The latest uptick in the currency pair could be associated with a minor pullback in the US Dollar across the curve, as the US Treasury bond yields extend to the downside.  

Markets remain unnerved amid surging COVID cases in China, assuming that the resurgence could disrupt consumption and manufacturing in the world’s second-largest economy.

Further, risk appetite was curbed by uncertainty ahead of the major central banks’ monetary policy decisions this week. The US Consumer Price Index (CPI), the Federal Reserve and the European Central Bank (ECB) interest rates decisions will be closely followed in the week ahead.

Safe-haven flows into the US government bonds weigh negatively on the Treasury yields across the curve, eventually dragging the US Dollar Index back below the 105.00 level.

EUR/USD: Technical outlook

EUR/USD has been traversing within a rising channel formation since November 11, with bulls now looking to challenge the upper boundary of the channel, at 1.0635.

The 14-day Relative Strength Index (RSI) stays flat above the 50.00 level, suggesting that there is more room for the upside.

Adding credence to the upward potential, the bullish crossover of the 21 and 200-Daily Moving Averages (DMA), confirmed last week, remains in play.

Euro buyers could take out the 1.0600 barrier before attempting a break above the aforesaid technical resistance.

On the other side, bulls will guard the December 7 low at 1.0443 before the mildly bullish 21 DMA at 1.0417 gets tested.

EUR/USD: Daily chart