The greenback has been extending gains for the fifth consecutive session. On Monday, USDX reached new 3-week highs, having climbed above 91.1.
Surprisingly, the US dollar is rising despite the renewed demand for risk.
Investors seem to be optimistic about the recovery prospects of the US economy compared to other leading economies.
According to experts at Bloomberg, GDP in the US will exceed pre-pandemic levels by mid-2021. The successful vaccination program and the next package of stimulus measures in US are expected to boost the economic growth.
Last weekend, the House of Representatives approved a $1.9 trillion stimulus package proposed by Joe Biden.
However, the bill has yet to be passed by the Senate where Democrats gained a thin majority, while Republicans oppose the adoption of the relief package in its current form. The main sticking points are the direct payments of $1,400 to US citizens and the increase of the federal minimum wage to $15 per hour.
Reportedly, Democrats may agree not to increase the minimum wage in order to achieve overall progress.
Prospects of a big fiscal stimulus and increased government spending are putting pressure on the US Treasury bonds, thus leading to higher yields and a stronger US dollar.
Meanwhile, the euro has failed to take advantage of the improved risk sentiment.
On Monday, the EUR/USD pair climbed to 1.2100 but pulled back later in the session.
While Europe is trying to ramp up the vaccination process, it still stays far behind the United States that has added the Johnson & Johnson vaccine to its arsenal.
In addition, the ECB officials have expressed concern about rising bond yields in the EU. They fear that higher yields of the long-term bonds could undermine the European economic recovery.
Last Friday, the representative of Greece in the ECB, Yannis Sturnaras, called for increasing the pace of ECB bond purchases as part of the PEPP anti-crisis program aimed at combating the consequences of the pandemic.
The Governor of the Greek central bank thinks that at the next meeting on March 11, the Governing Council of the ECB should reconsider its approach to an unwarranted tightening of financial conditions in the EU.
This statement can be regarded as a call to accelerate the pace of the European QE program.
In general, this situation is favorable for the EUR/USD bears.
The pair is currently developing downside momentum and continues to retreat from the last week's highs of 1.2200.
The support is found at the levels of 1.2020, 1.2000, and 1.1950. If the price breaks through the 1.1950 support level, the pair may easily slide to the area of 1.1600.
Strong resistance for the pair is located at 1.2110, 1.2150, and 1.2180.