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EUR/USD: Trump-ed and may fall on the Fed, but oversold conditions cloud outlook

  • EUR/USD has been extending its drops as President Trump threatened tariffs.
  • Fed Chair Powell's testimony stands out today.
  • Wednesday's four-hour chart is pointing to further falls.

"The long and winding road" That Beatles' song is perhaps the best representation of EUR/USD price action – which is slow, frustrating, but persistent and pays off the for those who are patient. And patience is also needed when trying to assess the state of US-Sino relations.

President Donald Trump threatened to slap China with new tariffs if a deal is not reached. His words are weighing on markets – which had expected the removal of duties, not new ones. On the other hand, he repeated his stance that China wants a deal "very badly."

Specifically for the euro, the president has also stated that the EU mistreats the US in several ways than are worse than China's – an ominous sign that that the administration may slap levies on German automobiles. A decision to delay such tariffs for another six months is awaited this week – but Trump's words trouble the common currency.

EUR/USD has extended its falls amid fears direct economic damage from falling exports to the US or indirect pain from weaker Chinese demand, as US levies weaken the economy of the Asian giant. 

Fed in focus

The focus now shifts to the central bank. Jerome Powell, Chairman of the Federal Reserve, will deliver an all-important testimony on Capitol Hill. The Fed recently signaled a long pause and a higher bar for raising rates than for cutting them.

However, recent economic indicators such as the jobs report, are pointing to improvement, and Powell may focus on that – potentially pushing the dollar higher. Comments trade uncertainty, growth, and inflation – with fresh figures due out ahead of his appearance – may all move markets.

See Powell Preview: Praising the economy and rebutting the President

US Core Consumer Price Index advanced to an annual level of 2.4% in September, but this is insufficient for the Federal Reserve to raise rates. Will underlying inflation continue rising? 

See US CPI Preview: Inflation remains secondary to Fed policy

Back in the old continent, industrial output figures for September are set to show a slide – serving as a reminder of the continent's economic issues. Te primary release euro-zone release of the week is German Gross Domestic Product (GDP) data for the third quarter. The report, due early on Thursday, will probably confirm a recession.

For today, trade headlines, US CPI, and Powell's testimony are set to dominate. 

EUR/USD Technical Analysis

EUR USD Technical Analysis November 13 2019

EUR/USD has been sliding and touched the psychological level of 1.10 – a former quadruple top that has proved its strength as support. Is euro/dollar bottoming out? The Relative Strength Index on the four-hour chart is below 30 – reflecting oversold conditions and indicating a bounce. 

Nevertheless, most recoveries in recent days have proved to be "dead cat bounces" – ephemeral rises, followed by fresh lows. The currency pair remains below the 50, 100, and 200 Simple Moving Averages – a bearish sign.

Below 1.10, the next significant support line is only at 1.0940, which provided support in early October. It is followed by 1.0905, which was a swing low in late September, and finally by the 2019 trough of 1.0879. 

Some resistance awaits at 1.1035, a stepping stone on the way down, and 1.1055, which capped it last week. Next, we find 1.1090, a double top, and 1.1110. 

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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