- The EUR/USD and USD/CNH are displaying a high degree of correlation.
- The EUR could take a beating if CNH drops on renewed trade concerns.
- The American dollar may also pick up a bid if Fed's Powell sounds hawkish.
The EUR/USD pair is on the defensive, having closed yesterday below 1.1315 (61.8% Fib R of 1.1215/1.1472).
The bearish close happened as hawkish comments from Fed's Clarida and rising trade tensions put a bid under the US dollar.
Bull breakout in USD/CNH could prove costly for the EUR
Trapped in a narrowing price range, the USD/CNH pair (offshore yuan exchange rate) charted a doji candle yesterday, signaling indecision in the marketplace, even though Trump said that it was "highly unlikely" he would accept China's request to hold off on the tariff hike, which is due to take effect on January 1.
The CNH's resilience in the face of renewed trade concerns puts a question mark on the sustainability of losses seen in the EUR/USD yesterday. This is because the correlation between the two pairs has risen from 0.45 to 0.77 in the last few days.
The strengthening correlation also means the EUR could take a beating if the USD/CNH sees a symmetrical triangle breakout on rising trade tensions.
Fed's Powell is scheduled to speak at 17:00 GMT
The bid tone around the US dollar may strengthen if Fed Chair Powell reaffirms gradual path of tightening and says the rates would have to move above the neutral level for some time. The EUR/USD pair, however, may draw bids if Powell puts more emphasis on the rising risks to the US economy.
The preliminary estimate of the US third-quarter GDP, scheduled for release at 13:30 GMT, and the ECB speak also influence the pair.
EUR/USD Technical Levels
EUR/USD
Overview:
Today Last Price: 1.1294
Today Daily change: -2.0 pips
Today Daily change %: -0.0177%
Today Daily Open: 1.1296
Trends:
Previous Daily SMA20: 1.1362
Previous Daily SMA50: 1.1473
Previous Daily SMA100: 1.154
Previous Daily SMA200: 1.178
Levels:
Previous Daily High: 1.1346
Previous Daily Low: 1.1277
Previous Weekly High: 1.1473
Previous Weekly Low: 1.1328
Previous Monthly High: 1.1625
Previous Monthly Low: 1.1302
Previous Daily Fibonacci 38.2%: 1.1303
Previous Daily Fibonacci 61.8%: 1.1319
Previous Daily Pivot Point S1: 1.1267
Previous Daily Pivot Point S2: 1.1238
Previous Daily Pivot Point S3: 1.1199
Previous Daily Pivot Point R1: 1.1336
Previous Daily Pivot Point R2: 1.1375
Previous Daily Pivot Point R3: 1.1404
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