EUR/USD clings to small daily gains above 1.1250

• EUR/USD trades in the positive territory early Monday.
• Major European equity indexes are suffering heavy losses.
• Investors eye Omicron headlines in the absence of high-tier data releases.

The EUR/USD pair is staging a technical recovery after falling sharply on Friday and was last seen posting small daily gains at 1.1265. Modest dollar weakness during the European trading hours seems to be helping the pair edge higher ahead of the American session.

Market mood sours on Monday

The risk-averse market environment at the start of the week is causing US Treasury bond yields to push lower and making it difficult for the greenback to preserve its strength. The US Dollar Index was last seen losing 0.12% on a daily basis at 96.55.

Meanwhile, Germany's DAX Index is losing more than 2% and the Euro Stoxx 50 Index is losing 1.7% after the opening bell on Monday as investors seek refuge amid the surging number of confirmed coronavirus cases in Europe. Following the Netherlands' decision to go into another lockdown ahead of the Christmas holiday, market participants remain concerned over the potential impact of additional restrictions on the economic activity.

In the second half of the day, the risk perception is likely to remain the primary driver of financial markets. Even if US T-bond yields continue to fall, a selloff in US stocks could help the dollar limit its losses.

Technical levels to watch for