EUR/USD Forecast: Dual trade worries may end dead-cat bounce, outlook bearish
|- EUR/USD has been looking for a direction amid trade headlines.
- President Trump's speech and speculation about Fed policies are set to dominate trading.
- Tuesday's four-hour chart is pointing lower after exiting oversold conditions.
Even a dead cat bounces when it hits the floor – this pattern has been dominating EUR/USD trading in recent days – but the floor may open up.
The US is set to postpone slapping tariffs on European cars for another six months. President Donald Trump is set to sign off on the delay this week, according to reports. New levies – which would hit German carmakers – are not priced in by investors. Outgoing European Commission President Jean-Claude Juncker recently said it would not happen.
In case the mercurial US president defies expectations and announces duties, the common currency has room to fall.
Trump will deliver a speech at the New York Economic Club later today with traders wanting to hear his take on US-Sino trade talks after he recently denied that rolling back tariffs is on the cards. The president may also provide further details about his economic plans, one year ahead of the elections.
Markets may cheer optimism about striking a deal and fall if he remains skeptical. How will EUR/USD react? On the one hand, the dollar benefits from safe-haven flows – and may advance in response to a pessimistic tone. On the other hand, a trade deal lowers the chances of the Fed cutting rates anytime soon.
Beyond Trump
In any case, euro/dollar volatility is set to rise as France and the US return from bank holidays on Monday.
Apart from Trump's speech, markets are awaiting testimony from Jerome Powell, Chairman of the Federal Reserve, due on Wednesday. Ahead of the event, Vice-Chair Richard Clarida will speak today. Eric Rosengren, the Boston Fed President, supported the bank's wait-and-see approach in a speech on Monday.
In Germany, the ZEW Economic Sentiment survey is set to show higher confidence – but still in negative territory, reflecting pessimism.
Overall, Trump is set to top the agenda for euro/dollar traders today.
EUR/USD Technical Analysis
Euro/dollar continues suffering from downside momentum on the four-hour chart and trades below the 50, 100, and 200 Simple Moving Averages. Moreover, the Relative Strength Index has risen above 30 – exiting oversold conditions and opening the door to further falls.
Support awaits at 1.1015, which was the low point on Friday. It is followed by the round number of 1.10 – a former quadruple top. The swing lows of 1.0940 and 1.0905 are next.
Resistance awaits at 1.1055, which has been separating ranges in November. Next, 1.1090 capped EUR/USD twice last week. 1.1110 worked twice as support and is closely followed by 1.1130, another cushion when the pair traded on higher ground.
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