- EUR "downside corrective," eyeing 1.221, 1.2130, 1.2058.

- EUR/risk correlation disrupted as USD lifted by profit-taking.

- Georgia election, fiscal outlook, protests & Fed all in frame.

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EUR/USD spot rate at time of writing: 1.2219Bank transfer rate (indicative guide): 1.1794-1.1880FX specialist providers (indicative guide): 1.2039-1.2136More information on FX specialist rates hereThe Euro is on the backfoot at the start of the new week, beating a retreat from multi-month highs in a move that could turn into a more meaningful correction over the coming days according technical analysts at Commerzbank.

Europe's single currency ceded the initiative to all major rivals on Friday as the Dollar continued to draw support from what has been widely billed as profit-taking by investors' on earlier wagers against the U.S. currency, which saw the greenback rise against all of its major counterparts.

This trend continues on Monday amidst soft investor sentiment that confirms the Dollar's safe-haven status that sees demand grow as investors cash out of stocks and other riskier assets.

Reasons for investors to be more cautious at the start of the new week include a Covid-19 outbreak in China's Hebei province - which went into lockdown last week - is worsening.

Japan is closed for holiday today, just days after Tokyo entered a second state of emergency amidst spreading Covid-19 cases.

U.S. political risks are not to be overlooked on news U.S. House Speaker Pelosi will table a resolution urging President Trump to be removed from office under the 25th Amendment.

While the Euro traded up near four-year highs on Wednesday, measures of momentum on the charts were falling and at the same time indicating a short-term trend change could be afoot. Now, 1.2210 is said to be key to the outlook.

"EUR/USD has seen a divergence of daily RSI – this reflects a loss of upside momentum and near term is downside corrective. It has eroded the near term uptrend, however in order to alleviate upside pressure, the market will need to see failure at 1.2210 the 31st December low," says Karen Jones, head of technical analysis for currencies, commodities and bonds at Commerzbank. "This should trigger losses to the 1.2130 21st December low and potentially 1.2058 the 9 th December low."

Above: Euro-to-Dollar rate at hourly intervals alongside S&P 500 index futures (blue).

Jones and the Commerzbank team still have a bullish one-to-three month outlook in which they expect the Euro will rally as far as its 200-week moving-average at 1.2624, although they also said on Friday that a daily close beneath 1.2210 would indicate that further short-term declines are likely beforehand.

Such losses could take the Euro as far back as 1.2058 where studies of the charts suggest it would be likely to stabilise.

"EURUSD gains have stalled in the low 1.23s and the EUR rally has lost some trend dynamism in the process on the intraday oscillators. The broader technical picture for the EUR remains bullish, however, with daily, weekly and month DMI oscillators still bullishly aligned in strong fashion," says Juan Manuel Herrera, a strategist at Scotiabank. "We look for the EUR to remain well-supported through the mid/upper 1.21s. Modest EUR dips remain a buy."

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EUR/USD Forecasts Q2 2023 Period: Q2 2023 Onwards Details: Consensus institutional forecast targets + max & min targets. Contributors: Citi, Barclays, Morgan Stanley & more Provider: Global Reach Partners Type: Free Download Please Access Here

{wbamp-hide end}{wbamp-show start}{wbamp-show end}With charts aside, price action will be driven in the coming days by the very same factors that helped lift the Dollar and weigh on the Euro last week.

"In the limited four sessions so far this year, the USD has moved in the opposite direction to US equities only once," says Daragh Maher, head of U.S. FX strategy at HSBC, in a Friday note. "The first week’s price action also is consistent with our view that while the USD may be on the defensive, any weakness will likely have its limits as we view this as a cyclical USD reaction to the global upswing rather than a structural USD bear story. It is interesting how tapering talk, which has arrived rather early though is still in its infancy, is already giving more strident structural USD bears pause for thought."

Only time could confirm for sure the likely underlying motivation of investors cashing out of Dollar bets last week, given the multiple candidates.

Above: 10-year U.S. government bond yield with Fibonacci retracements of December 2019 fall.

"We are watching to see how the market responds to higher US yields, though the overall USD-weaker theme should remain intact," says Sarah Ying, a quantitative strategist at CIBC Capital Markets. "Long EUR/USD remains a crowded trade, and will be subject to occasional selloffs that may be more aggressive than other pairs."

Last week's price action came amid protests in Washington, a Georgia State election that handed the Democratic Party a majority in the previously-Republican Senate and among various remarks from Federal Reserve (Fed) policymakers who've suggested a tapering of government bond purchases may come sooner rather than later.

But only the Fed and election outcome could have driven the breakout higher in U.S. bond yields which, if sustained, might act as a lasting impediment to the Dollar downtrend and Euro-to-Dollar uptrend. This is why the market will likely pay close attention to multiple speeches from Fed rate setters who're are scheduled for this week before Thursday when Chairman Jerome Powell will address an audience hosted by Princeton University at 17:30 London time.

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EUR/USD Forecasts Q2 2023 Period: Q2 2023 Onwards Details: Consensus institutional forecast targets + max & min targets. Contributors: Citi, Barclays, Morgan Stanley & more Provider: Global Reach Partners Type: Free Download Please Access Here

{wbamp-hide end}{wbamp-show start}{wbamp-show end}Anything which suggests a tapering of bond purchases is featuring more prominently in policymakers' discussions could be a source of support for the Dollar, and a headwind for the Euro.

Meanwhile and in Europe, the calendar is devoid of major data but the Euro will listen closely to Monday and Wednesday speeches from European Central Bank (ECB) President Christine Lagarde at 14:40 and 09:00 respectively. It could also scrutinise minutes of December's meeting at 12:30 on Thursday.

"Various greed vs. fear indicators have started to hint of extreme optimism and a very uniform thinking/positioning. We also note how not a single investment bank found reasons to doubt the current USD bear market in the 2021 outlooks," says Martin Enlund, chief FX strategist at Nordea Markets. "We stay long EUR/USD, short USD vs. EM and long risk assets, but we see an increased probability of a 2021 with two faces. First higher until summer, then lower."

Above: Euro-to-Dollar rate alongside Dollar Index (blue).