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EUR/USD Forecast: Tentative rise amid fears of a euro-zone recession, trade headlines

  • The EUR/USD is rising in a very narrow range in the wake of the new week.
  • The signs of a slowdown in the euro-zone are accumulating while US-China trade tensions continue.
  • The technical picture is slightly bearish but the pair is still looking for a direction.

The EUR/USD is trading around $1.2300, at the upper end of a very narrow range between $1.2260 and $.12302. These are narrow ranges even for Mondays, which are usually somewhat slower.

The tight trade contrasts the action around several geopolitical developments. The see-saw around trade relations between China and the US continues. After Trump tweeted that he will impose further tariffs on China early on Friday, the tone over the weekend was different. The US President said that his Chinese counterpart Xi Jinping and he will remain friends. Soothing words also came from Treasury Secretary Steven Mnuchin. However, reports coming out of China suggest that the world's second-largest economy may be contemplating a devaluation of the Yuan, a move that serve as an escalation in trade.

So far, higher trade tension pushed the US dollar down while optimism has pushed it higher. And while today's forex moves are minimal, things could erupt at any moment

More: Trump tariff plan explained: What are trade wars and how do they affect currencies

Elsewhere, North Korea has notified the White House that it is ready to discuss denuclearization, adding to hopes for peace. In Syria, a bombing of an airbase was attributed to Israel. This follows a chemical attack by the Syrian regime that was condemned by the West. Both developments did not move the needle in the EUR/USD.

In the euro-zone, we learned about further signs of a slowdown. The Sentix Investor Confidence measure extended its falls and reached 19.6 points, worse than expected and an extension of the drops from the highs. The disappointing forward-looking gauge joins the hard data reported from Germany last week: factory orders, industrial output, and retail sales all missed the mark.

The British press suggested that the euro-zone is on its way to an outright recession. The headlines may be sensational but this kind of fear may certainly manifest itself to lower confidence, at least among ECB members, that may opt to extend the current QE program.

With a light calendar today, markets are gearing towards a busy Wednesday: a speech by ECB President Mario Draghi, US inflation data, the FOMC Meeting Minutes stand out.

EUR/USD Technical picture - More bearish than bullish signs

EURUSD April 9 2018 chart technical analysis

The EUR/USD is trading below the 50-day Simple Moving Average which comes out around $1.2345. This is also a high point seen last week. The RSI is slightly below 50 points and Momentum points to the downside. None of these indicators is strong, but the direction is down. The pair has also marked a lower low with the recent drop to $1.2210, below the $1.2240 trough seen in March, another bearish sign.

Below $1.2210, the February low of $1.2155 is a key level to the downside. 

Resistance above $1.2345 awaits at $1.2412, a high point dating back to March 13th. Higher above, the March 8th peak of $1.2447 is next.

More: EUR/USD Forecast: sellers aligned around 1.2300

Author

Yohay Elam

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.

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