EUR/USD eyes second straight yearly loss

EUR/USD has erased a major chunk of the gains seen in the January 2017-February 2018 period and is on track to end 2019 on a negative note.

At press time, the pair is trading at 1.1082, representing a 3.17 percent drop on a year-to-date basis. The pair fell by 14.14% in 2018.

Also, the pair has retraced more than 60 percent of the rally from the January 2017 low of 1.0341 to February 2018 high of 1.2556.

Trade tensions weighed on Euro in 2019

The Euro has had a tough time, despite the US Federal Reserve embarking on a 1990s-style mini easing. The central bank cut rates by 25 basis points in July, September, and October to cushion the economy against risks arising from the Sino-US trade war. Further, the Fed expanded its balance sheet by more than $300 billion in the September-December period.

Even so, the dollar held ground against the single currency, as escalating trade tensions pushed Germany on the brink of recession. Also, the European Central Bank cut rates further into the negative territory in September and announced a new bond-buying program.

Recovery ahead?

The trade tensions have eased somewhat recently with the US and China reaching a phase-one trade deal.

More importantly, with the elections due in November 2020, President Trump has a strong incentive to soften his stance on China and agree to a trade truce if not a comprehensive deal.

As a result, many observers expect EUR/USD to gain ground in 2020. However, sustained gains will likely remain elusive if the Eurozone economic data fails to show material improvement.

Technical levels