At the time of writing, most Asia-Pacific stock indices were trading in red, mainly due to the negative close last Friday. At the same time, demand for risky assets are decreasing amid the persistent rise of COVID-19.

According to Johns Hopkins University, COVID-19 cases in the US have now exceeded 25 million, while the vaccine situation remains far from positive. Both highly anticipated vaccines (from AstraZeneca and Pfizer) were delayed in delivery, therefore, supply will be limited in the next few weeks. To add to that, UK Health Secretary Matt Hancock said the introduced vaccines may not be as effective against the newer, more virulent strain of the virus, so governments may still need to tighten restrictive measures. Such news, of course, does not add enthusiasm to market participants.

In terms of economic news, Markit indices look quite ambiguous. Indicators in the UK and EU have declined, while in the US, both manufacturing and services have recovered a bit. However, data from the IHS Markit is not very popular in the US, as traders trust ISM research more. Nonetheless, this signal is in favor of a stronger dollar.

Aside from that, last Friday, US President Joe Biden said the situation in the US economy continues to deteriorate, so urgent and decisive measures are needed to get out of this situation. As a result, demand for risk assets continued to decline even this Monday, putting pressure on commodities, with the dollar and other safe-haven assets gaining a slight edge.

EUR / USD

In the face of the growing threat brought by the coronavirus, EU leaders held a video summit, during which they decided to tighten some measures. The European Commission is also set to present additional considerations to contain the virus, however, if they include pressure on production, the position of the euro could fall.

Meanwhile, the latest CFTC report did not bring anything unexpected. Net long position in the euro rose by 997 million, but it was not enough to confirm a bullish sentiment. To add to that, to date, long positions have almost completed its growth, which may indicate an upcoming correction, especially since the dynamics of the yield spread is clearly not in favor of the euro. Corrective decline also has not been completed, therefore, after a slight pullback from 1.2054, there may be another wave of downward movement.

In any case, it is important for EUR / USD to move above 1.2223, as such would increase the chances of a return to the bullish trend. Since this did not happen yet and the fundamental background is in favor of a decline, the quote may move towards 1.2190, after which it may drop again to 1.2054.

GBP / USD

Net long position in GBP increased by 62 million over the reporting week, which is quite minimal that is why it does not affect the long-term prospects of the pound. To add to that, the dynamics of the estimated fair price has no direction, so the chances of continued growth are still there, although they are gradually decreasing.

In another note, on Tuesday, a report on the state of the UK labor market will be published. Expected statistics for it are mixed, that is, a rise in unemployment amid an increase in average wages. If wages really came out in line with the forecasts, they will compensate for the negativity brought by the rise in unemployment.

As for EUR/USD, attempts to break 1.3744 will still occur, especially since there are no signals for a downward reversal. Trend should remain bullish, although the chances of continued growth are diminishing every day. The only possible recommendation in the current environment is to wait for more clarity.