EUR/USD Forecast: German political crisis and trade wars keeping it down

The EUR/USD is trading lower at the wake of the new week.
Germany's political crisis and concerns about trade weigh as the Sintra Symposium begins.
The technical picture remains bearish on the pair that is still out of oversold territory.

Yohay Elam FXStreet

The EUR/USD is trading below 1.1600, the area it had recovered to on Friday. The refugee crisis in Europe is taking its toll on the common currency.

German Chancellor Angela Merkel's CDU party is in a crisis with its sister Bavarian CSU party of migration. Interior Minister Horst Seehofer that leads the CSU wants the country to stop migrants that are being processed in other countries at the border, contrary Merkel's stance. The party faces regional elections in the autumn and is adopting a hardline stance to fend off the right-wing AfD party.

They want this change in policy to be approved ahead of the EU Summit toward the end of the month. If the crisis deteriorates, some speculate it could bring Germany's mainstream government down. However, Merkel and Seehofter could also find a compromise.

In broader markets, concerns about global trade sour the mood. The US announced tariffs on $50 billion worth of goods on China on Friday. China was then quick to announce counter tariffs. The tit-for-tat action comes after the G-7 Summit ended without a communique, in a move also related to trade. Stock markets were slow to react on Friday, but a stronger reaction could be seen now.

Also, the EUR/USD remains pressured by last week's strikingly different tones from central banks. The Federal Reserve raised interest rates, signaled two additional ones, and conveyed a message of optimism. Fed Chair Jerome Powell stated that the US economy is doing very well, among other hawkish signs.

On the other side of the Atlantic, the European Central Bank finally made a move towards the end of bond-buying, but wrapped it up with conditions, added a pledge to maintain low interest rates through the summer of 2019, and ECB President Mario Draghi sounded very cautious and stressed the conditionality of the move.

Draghi hosts a conference in Sintra, Portugal. He will deliver opening remarks today, but will probably make a significant speech only on Tuesday. Draghi, Powell, and others will participate in a panel discussion on Wednesday.

EUR/USD Technical Analysis - Bearish

EUR USD technical analysis chart June 18 2018

The EUR/USD is trading well under the 200-day Simple Moving Average and also under the 50-day one. The RSI is below 50 but above 30, indicating further falls while staying out of oversold territory.

The June 15th low of 1.1543 is an immediate line of support. The next one is the 2018 low of 1.1510. Below the round number of 1.150, we find 1.1480, an old level from July 2017.

Looking up, 1.1610 was a temporary support line on the way down. More importantly, 1.1650 served as support in early June and late May. 1.1730 served as a cushion for the pair before last week's collapse.

More: EUR/USD may find it hard to recapture 1.1600, and the road is open to 1.1493 – Confluence Detector

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD drops below 1.3550 on geopolitical tensions, hawkish Fed bets

GBP/USD trades with mild losses below 1.3550 in the second half of the day on Tuesday. The US Dollar recovers some ground amid ongoing Middle East tensions and hawkish expectations around the Fed's interest rate outlook, weighing on the pair ahead of US data releases.

EUR/USD stays below 1.1600 ahead of US data

EUR/USD struggles to capitalize on the overnight bounce and trades below 1.1600 on Tuesday. The data from the Eurozone showed that the annual HICP inflation rose to 3.3% in August from 2.9% in July, matching the market expectation, while the core HICP inflation edged lower to 2.4% from 2.5% in this period. In the second half of the day, JOLTS Job Openings and ISM Manufacturing PMI data will be featured in the US economic calendar.

Gold extends reversal below $4,400 on hawkish Fed repricing

XAU/USD extends its reversal below $4,400, posting a nearly 7% decline from last week's highs. Precious metals struggle this week as markets reprice a Fed rate hike in September.

Crypto Today: Bitcoin, Ethereum, XRP struggle to extend gains despite ETF inflows

Bitcoin stalls while holding above $78,000 support as ETF inflows return. Ethereum takes a breather around $2,450 amid sustained institutional support. XRP remains pressured as the 200-day EMA provides immediate support.

US JOLTS Job Openings set to show a steady labor market

The US Bureau of Labor Statistics has a busy week, releasing relevant employment data. It will start on Tuesday with the publication of the July Job Openings and Labor Turnover Survey (JOLTS) at 14:00 GMT. The JOLTS report is expected to show job openings stood at 7.3 million in July.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.