EUR/USD has been trading in a narrowing range – frustrating many traders. After the Federal Reserve cut rates but signaled no further moves, the pair found a balance. Here are three things that could tilt the balance to a move higher.
- Germany is preparing a special climate program that may boost the economy.
- US-China trade talks have better chances of moving forward.
- Friday’s technical chart trends to the upside.
1) German stimulus?
Germany has been under immense pressure to open its purse strings and boost the local – and European economy. The message from the European Central Bank and from several EU officials has been clear – but Berlin seemed reluctant to budge. Successive governments stuck to the “schwarze null” policy – a balanced budget.
However, Chancellor Angela Merkel and her cabinet are trying to iron out a plan to combat climate change. The focus on green initiatives comes as the topic tops the agenda in the continent’s largest economy and amid global climate strikes taking place today.
The climate emergency may be a good reason (or excuse) to ditch the tight fiscal stance. Merkel and her colleagues are due to publish their plans later today. If these include significant spending, the euro has room to rise – as it would ease the pressure on the ECB to add monetary stimulus. Less monetary stimulus means a stronger euro.
2) Hopes in trade talks
Trump’s advisors have been talking to the media and have provided contradicting accounts of the trade talks with China. Larry Kudlow expressed optimism by saying that there is a “softening” in the tone – while Michael Pillsbury said the US may slap new tariffs on China.
These comments left investors confused. Whose rhetoric should we believe? The most recent argument between Trump’s top officials resulted in the departure of National Security Adviser John Bolton – a hawk if there ever was one. More moderate voices won the debates on Iran and Afghanistan.
Will Trump listen to the moderates also on trade? His postponement of tariffs – twice within a month – points to a higher chance that trade talks with China will advance rather than break down.
3) Technical point to the upside
EUR/USD is enjoying fresh upside momentum on the four-hour chart. Moreover, it is trading above the 50 and 100 Simple Moving Averages – bullish signs. Only the 200 SMA caps it.
In addition, the pair is trading alongside an uptrend support line that has held up so far. It is close this line and may bounce from here. On the upside, downtrend resistance caps it but remains further above, leaving room to the upside.
Resistance awaits at 1.1077, which held it down twice in recent days. Next, we find 1.1110, that was the high point last week. It is followed by1.1165, a swing high from August.
Looking down, support awaits at 1.1015, which was a support line earlier this week. It is followed by 1.1090 that provided support beforehand, and finally – 1.0926 is the 2019 low.
Equities Contributor: FXStreet
Source: Equities News