EUR/USD Forecast: The thrill is gone and looking vulnerable ahead of critical data

Calm is not necessarily a good thing for EUR/USD. The rhetoric around the US-China trade war has softened, US Treasury Secretary Steven Mnuchin is set to fly to Beijing for more talks, and stock markets are more stable. However, as time passes by, the new US tariffs are set to take their toll and additional ones are prepared.

In China, retail sales, industrial output, and foreign investment numbers all disappointed. Nevertheless, markets expect the Chinese authorities to provide stimulus measures. US President Donald Trump noted China's efforts and said that the Fed should cut interest rates as well. This may not happen so fast.

And while bond markets foresee a growing chance of the Federal Reserve slashing rates this year, New York Fed President John Williams pointed to the inflationary effect that these duties have. And that may imply the Fed raising rates to battle rising prices. 

In the meantime, Germany has reported a return to growth in the first quarter of the year: 0.4%, as expected. Euro-zone GDP is projected to be confirmed at 0.4% after the news from the largest economy. 

The most substantial US figure is due later today: retail sales for April. Consumers were out and about in March with sales volume rising sharply. More moderate figures are projected for April. These low expectations may result in an upside surprise, that could send the greenback higher.

See US Retail Sales Preview: Labor Market Rules

Overall, trade developments and tweets from Trump remain in the limelight, but the top-tier US publication will have its say as well.

EUR/USD Technical Analysis

EUR/USD has lost its upside momentum and the 100 Simple Moving Average on the four-hour chart. It is currently struggling with the 50 SMA. The Relative Strength Index has also dropped from the highs. All in all, the bulls have retreated.

Initial support awaits at the round number of 1.1200 which supported the currency pair earlier today and the price also coincides with the 200 SMA. 1.1175 was a swing low last week, and it is followed by 1.1135 which was the low point in May. The 2019 trough of 1.1110 is the next level to watch.

EUR/USD is battling 1.1220 that capped it last week and provided some support this week. Next up, 1.1250 was a swing high last week and 1.1265 is a triple top, holding EUR/USD down in late April, early May, and also in mid-May.