- Resurgent USD demand kept exerting some pressure on Thursday.
- Conflicting trade-related headlines helped limit deeper losses.
Following an early failed attempt to retake the 1.1100 handle, the EUR/USD pair came under some renewed selling pressure and dropped to fresh multi-week lows on Thursday. The move lower was primarily driven by broad-based US Dollar strength. Positive trade-related headlines triggered a fresh wave of the global risk-on trade and led to a sharp intraday upsurge in the US Treasury bond yields, which eventually helped revive the Greenback demand.
Focus remains on trade
Officials from both sides said on Thursday that China and the United States have agreed to roll back tariffs on each others' goods in a "phase one" trade deal if it is completed. The risk sentiment got an additional boost after White House spokeswoman Stephanie Grisham told Fox News Channel on Thursday that the US is "very, very optimistic" about reaching a trade deal with China soon.
Meanwhile, the shared currency was further weighed down by the fact that the European Commission downgraded Euro-zone growth forecast for this year and the next amid global trade tensions. This came on the back of worse than expected German Industrial Production figures for September and did little to lend any support or stall the pair's slide to the lowest level since October 16.
However, conflicting reports, suggesting that the subject of rolling back tariffs faced fierce internal opposition in the White House, raised some scepticism about a trade deal. Further, White House adviser Peter Navarro said that there is no agreement at this time to remove any of the existing tariffs as a condition of the Phase One deal and the final decision rests with the US President Donald Trump. The developments led to a slightly softer risk tone and the same was evident from a modest pullback in the US bond yields, which kept a lid on any strong follow-through USD positive move and helped limit deeper losses for the major.
The pair held stable near mid-1.1000s through the Asian session on Friday as market participants now look forward to the German trade balance data for a fresh impetus. From the US, the release of the preliminary Michigan Consumer Sentiment Index for November might further collaborate towards producing some meaningful trading opportunities on the last day of the week.
Short-term technical outlook
From a technical perspective, the pair seems to have already confirmed a bearish double-top pattern on the daily chart and thus, remains vulnerable to continue with its bearish trajectory. From current levels, any subsequent slide is likely to get extended toward challenging the key 1.10 psychological mark, below which the fall could further get extended towards 1.0965-60 horizontal support en-route the 1.0925 region.
On the flip side, immediate resistance is pegged near the double-top neckline support breakpoint – around the 1.1080-75 region – and is closely followed by the 1.1100 round-figure mark. A sustained move beyond the mentioned hurdle, leading to a subsequent strength beyond 100-day SMA, might trigger a short-covering move and lift the pair back towards the 1.1165-70 heavy supply zone.
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