- The USD remained under pressure on Tuesday amid escalating trade tensions.
- Trump's threat to impose tariffs on France capped the upside for EUR/USD.
- The final Euro-zone PMIs, important US macro data eyed for a fresh impetus.
The US dollar suffered another round of selloff on Tuesday after the US President Trump indicated that a trade deal with China may not come until after the 2020 US presidential election. Adding to this, the US Congress on Tuesday overwhelmingly approved a bill condemning China’s mass detention of ethnic Muslims, and called for sanctions against some officials responsible. This comes after Trump last week signed a bill supporting Hong Kong’s pro-democracy protesters, which coupled with China's harsh reaction and warning to retaliate could further escalated tensions between the world's two largest economies.
Focus on trade developments
Persistent USD selling bias did lend some support to the EUR/USD pair, albeit bulls lacked any strong conviction and the upside remained capped below the 1.1100 handle. The fact that Trump also announced his plans to impose tariffs of up to 100% on French products worth $2.4B turned out to be one of the key factors that kept a lid on any runaway rally for the major. Meanwhile, the French Finance Minister Le Maire responded to the threat and said that the EU wouldn’t hesitate to strike back, further fueling fears of a global trade war.
The bearish pressure surrounding the greenback now seems to have abated, at least for the time being and led to the pair's slightly weaker tone during the Asian session on Wednesday. Moving ahead, market participants now look forward to the final version of the Euro-zone Services PMI print for November for a fresh impetus. The key focus, however, will be on the US macro releases, the ADP Employment report on private sector employment and ISM Non-Manufacturing PMI, due later during the early North-American session. This along with the incoming trade-related headlines might continue to play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities.
Short-term technical outlook
From a technical perspective, the pair seemed struggling to capitalize on its move above the 100-day SMA and continues to face stiff resistance near the 1.1095-1.1100 supply zone. Hence, it will be prudent to wait for some strong follow-through buying before positioning for any further near-term appreciating move. Above the mentioned barrier, the pair is likely to aim back towards the double-top resistance, near the 1.1170-80 region, en-route the 1.1200 handle.
On the flip side, any meaningful pullback now seems to find some support near mid-1.1000s, which is closely followed by the 1.1025 horizontal level. Failure to defend the mentioned support might negate prospects for any further positive move and turn the pair vulnerable to slide back towards testing sub-1.10 levels. The pair then could extend the downward momentum further towards the 1.0955-50 intermediate support ahead of the 1.0900 handle.
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.