EUR/USD: A dead cat bounce ahead of looming US tariffs

Amid a broad-based US dollar bullish consolidation in Asia, the EUR/USD pair is seeing some signs of life above the 1.16 handle, which is likely to be short-lived as markets await the announcement of the new US tariffs on the Chinese imports.

EUR/USD: Focus on tariff announcement

The spot is seen making tepid recovery attempts from Friday’s low at 1.1619, as the USD bulls take a breather before the next push higher. The USD index trade modestly flat just shy of the 95 handle.

On Friday, the EUR/USD pair retreated sharply from two-week tops of 1.1724 after the US dollar staged a solid comeback on rising US yields, upbeat revised retail sales and renewed US-China trade concerns.

Markets eagerly await the US President Trump’s announcement of the imposition of the new tariffs on the additional $200 billion worth of Chinese imports on Monday, to which China responded that they would pull out of the trade talks under the renewed tariff threat.

Escalating US-China trade angst will continue to keep the buoyant tone intact around the safe-haven US dollar, which is likely to remain the exclusive driver for the major in the day ahead. The Eurozone final CPI release and the US second-liner macro data will play a second fiddle to the US dynamics and trade-related news.

EUR/USD Technical Levels

According to Valeria Bednarik, Chief Analyst at FXStreet.com, “From a technical point of view, the pair is at risk of extending its latest decline, as it settled below the 23.6% retracement of the August rally. In the daily chart, the pair is also a few pips below its 20 and 100 DMA, while technical indicators gain bearish strength, the Momentum below its mid-line and at its lowest for the month, and the RSI currently at 52. In the 4 hours chart, technical indicators retreated from oversold readings to enter the negative territory, while the pair has also finished below its 20 and 100 SMA, all of which leans the scale toward the downside. The pair has found support these last few days at the 38.2% retracement of the mentioned rally at around 1.1570, the next relevant support for the upcoming sessions. Support levels: 1.1600 1.1570 1.1530. Resistance levels: 1.1660 1.1700 1.1735.”