EUR/USD Forecast: Holding its breath ahead Trump's trade talks

FXStreet  |
  • EUR/USD is clinging to 1.1200, trapped in a narrowing range.
  • All eyes are on trade talks in Washington.
  • The technical picture is balanced for the currency pair.

Will the US and China strike a deal, or is the global economy about to suffer? That is the main question on the agenda, and EUR/USD is holding its breath in anticipation.

A high-level Chinese delegation is on its way to Washington to discuss trade ahead of the US ultimatum to slap new tariffs on Friday. Chinese officials have said they will defend the interests of their country. Beforehand, Trump stated that "China broke the deal" by backtracking on earlier commitments.

When the world's top economies clash, the mood dampens. Asian stocks are down, and the safe-haven yen is up. However, the euro is reacting more cautiously. EUR/USD ranges are narrowing.

If both countries find a way forward on talks, the sentiment is set to improve, potentially pushing the currency pair higher. However, it is essential to note that once Trump is done with China, he may focus on trade tensions with Europe and especially its car industry.

And if Washington and Beijing end talks in acrimony, the dampened mood will weigh on stocks and also on the world's most popular currency pair.

Elsewhere, the economic calendar is quite light. US producer prices showed only a moderate increase of 0.2% in April, though there are signs of increasing underlying inflation pressure ahead of tomorrow's considerably more critical consumer prices data.

Fed Chair Jerome Powell speaks later in the day, but he addresses a conference about community banking, so he may not necessarily comment on monetary policy. Fed Governor Lael Brainard did not provide earth-shattering comments on Wednesday, nor did Mario Draghi, the President of the European Central Bank.

Overall, the fate of global trade is left, right, and center for markets.

EUR/USD Technical Analysis

EUR USD technical analysis May 9 2019

EUR/USD is "hugging" the 1.1200 level and trading within a 50-pip range for several days. That results in a convergence of the Simple Moving Averages towards the current price, the disappearance of Momentum, and the flattening of the Relative Strength Index. All in all, the four-hour chart tells us little about the next direction.

Resistance awaits at 1.1215 which was the top of the range in recent days. Significant resistance awaits at 1.1265 which capped EUR/USD in late April and early May. 1.1280, which provided support in mid-April, is next.

Support is at 1.1165 that was a swing low earlier this week. The swing low of 1.1135 seen on Friday is the next level to watch, and it is followed by 1.1110, the 2019 low.

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