EUR/USD analysis: risk aversion pauses, but the bearish stance prevails
|EUR/USD Current price: 1.1571
- Trump additional tariffs on Chinese goods trigger panic run, Wall Street finds buyers on dips.
- ECB's Draghi reiterates its cautious stance, adds pressure on the common currency.
The EUR/USD pair sunk to 1.1530, barely 20 pips away from its yearly low, as risk aversion dominated the FX board. Headlines indicating that US President Trump is moving toward imposing more tariffs on Chinese goods of up to $200B was the catalyst for the run to safety in detriment of high-yielding assets. The new duties will go into effect if China refuses to change its practices and insist on the tariffs recently announced, according to Trump's words. The news triggered sell-off in equities, although the US session saw the panic selling halting, helping the pair to bounce some from the mentioned low.
In the meantime, ECB's President Draghi spoke in the Central Banking Forum going on in Portugal, reiterating that, while growth and inflation are gradually returning toward the bank's objectives, 'significant' monetary accommodation is still needed, amid increasing uncertainty that has recently increased. Data was soft both shores of the Atlantic but totally ignored by speculative interest. The EU April Current Account resulted at €28.4B, below the previous and the expected €30.3B. Construction output was up 1.8% in April, beating expectations of -0.8%, although the annual reading came in at 1.8% below the 2.0% expected. In the US, Housing Starts soared 5.0% in May, although Building Permits sunk 4.6%. This Wednesday, Draghi will speak again while the US will publish Existing Home Sales figures, nothing that can interrupt sentiment-related trading.
The pair is currently trading in the 1.1570 region, with the risk still leaned to the downside according to intraday technical readings, given that in the 4 hours chart, selling interest contained advances on approaches to a bearish 20 SMA, currently around 1.1590, while the Momentum indicator continues heading south in negative territory and the RSI hovers near oversold readings, in line with additional declines ahead. The key support is 1.1509, the yearly low, with a break below it opening doors for additional declines toward the 1.1420 price zone. The bearish pressure could ease on a recovery beyond the 1.1640 region, where the pair set this week high.
Support levels: 1.1510 1.1460 1.1420
Resistance levels: 1.1590 1.1640 1.1685
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