EUR/USD Forecast: Double-bottom in danger, just like trade talks


  • EUR/USD is struggling as the market mood worsens on growing trade row.
  • Apart from trade, US consumer sentiment is also eyed.
  • Technically, the currency pair hangs above a critical double-bottom.

As long as the US and China continue talking, the tariffs and counter-tariffs are only part of the game, and a solution is not that far away. But trade talks may not resume, and markets do not like it. 

Chinese state media has reported that the country is no longer interested in talks with the US. Moreover, they have advised US Treasury Secretary Steven Mnuchin not to travel to Beijing as it may be useless. Stocks are down, and the safe-haven US dollar and Japanese yen are up. 

The news comes as the US announced that its blacklisting of Huawei, a Chinese telecommunications giant, comes into effect today. While Washington insists the move is not related to trade talks, it is hard to disconnect the two. This latest breakdown is a further deterioration after the world's largest economies detailed new levies on each other. 

A new factor in the trade war is the value of the Chinese yuan. The currency extends its erosion against the greenback, edging closer to 7 on USD/CNY. President Donald Trump accused China of manipulating its currency to support exports. So far, Chinese authorities have refrained from using this tool, keeping it as a last resort and also due to their own interests: preventing capital flight.

The escalation in trade tensions overshadows economic data, but the University of Michigan's preliminary consumer sentiment index for May will be of interest. It is set to hold onto its high ground, thus projecting further robust consumer spending. 

See Michigan Consumer Sentiment Preview: Growth, jobs, and sentiment

On Thursday, US housing data, jobless claims, and the Philly Fed Manufacturing Index all beat expectations, while Wednesday's retail sales report disappointed. 

Overall, headlines related to trade will likely set the tone.

EUR/USD Technical Analysis

EUR USD technical analysis May 17 2019

EUR/USD is trading below the 50, 100, and 200 Simple Moving Averages on the four-hour chart. Momentum remains to the downside while the Relative Strength Index holds above 30, thus not reflecting oversold conditions.

The pair hangs above critical support at 1.1165 which was the low point on Thursday and also a swing low earlier this month. Also, it capped EUR/USD in late May.

Below, we find 1.1135, which was the low point in May, and 1.1110, the 2019 trough. 1.1025, dating back to 2017, is next down the line.

Initial resistance is at 1.1200, a round number that also provided support earlier this week. It is followed by 1.1225 that is a double-top and coincides with the 100 SMA. Next up, we find 1.1250 and 1.1265.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex Analysis

Editors’ Picks

EUR/USD is pressured under 1.09 amid upbeat German data

EUR/USD is trading below 1.09 as ongoing SIno-American tensions boost the safe-haven US dollar. The German IFO figures for May beat expectations with 79.5 points in May. Coronavirus figures in Europe are declining.

EUR/USD News

GBP/USD is trading below 1.22 amid negative rates speculation

GBP/USD is trading below 1.22, as investors continue speculating about the BOE setting negative rates. PM Johnson is under pressure after his senior adviser violated the lockdown. The UK is on a bank holiday today.

GBP/USD News

Forex Today: Dollar in demand amid high Sino-American tensions, thin liquidity expected

The new week has kicked off with dollar strength as the US and China have kept tensions high. Thin liquidity and potential erratic movements may occur as the United States and United Kingdom are on holiday.

Read more

Gold trades with modest losses, holds above $1722 support zone

Gold met with some fresh supply on Monday, albeit lacked any strong follow-through selling and was last seen trading with only modest losses, just below $1730 level.

Gold News

USD/JPY clings to gains near 50-day SMA, bulls await a move beyond 108.00 mark

USD/JPY regains some positive traction on Monday amid a positive mood around equity markets. Concerns about worsening US-China tensions seemed to be the only factor capping further gains. Sustained move beyond 50-day SMA, 108.00 mark needed to confirm any near-term bullish bias.

USD/JPY News

Forex Majors

Cryptocurrencies

Signatures