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EUR/USD upside faltered around 1.1250, focus stays on US-China trade

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EUR/USD upside faltered around 1.1250, focus stays on US-China trade

  • The squeeze higher in EUR/USD lost momentum near 1.1250.
  • The greenback recovers some ground near 97.50/60.
  • German Factory Orders expanded more than expected in June.

The upbeat mood in the single currency stays well and sound so far this week, with EUR/USD now looking to consolidate the recent breakout of the key 1.1200 handle.

EUR/USD looks to trade, USD

Spot is advancing for the fourth consecutive session on Tuesday, regaining more than 2 cents since last week’s post-FOMC lows in the vicinity of 1.1020, always on the back of the renewed and strong selling bias surrounding the buck.

The pair managed to briefly surpass the key 100-day and 55-day SMAs earlier in the session, although the bullish attempt run out of legs around 1.1250, where some selling orders turned up.

In the meantime, the US-China trade conflict remains in centre stage as driver of the price action of the global assets. Yesterday, the US Treasury named China as FX manipulator following a sharp depreciation of the Chinese Yuan.

In today’s docket, positive German data also lent some support to EUR after Factory Orders expanded at a monthly 2.5% during June, bettering estimates.

What to look for around EUR

The upbeat momentum in the single currency is extending so far this week, always following USD-dynamics and rising concerns on the trade front and its impact on global growth. However, rallies in the pair are expected to remain limited in the near/medium term in tandem with ECB’s preparations for a fresh wave of monetary stimulus (probably in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. The ECB has already changed its forward guidance and it now expects rates to remain at ‘present or lower levels’ until at least mid-2020. The unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen limiting any occasional bullish attempts in EUR for the time being and also give extra sustain to the dovish stance in the ECB.

EUR/USD levels to watch

At the moment, the pair is gaining 0.09% at 1.1212 and breakout of 1.1249 (monthly high Aug.6) would target 1.1282 (high Jul.19) en route to 1.1297 (200-day SMA). On the flip side, the next support emerges at 1.1138 (10-day SMA) seconded by 1.1101 (low Jul.25) and finally 1.1026 (2019 low Aug.1).

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