- Euro erases daily gains versus US dollar, back to 1.1230.
- Greenback strengthens across the board and recovers from China tariffs slide.
After the announcement of tariffs from China, the EUR/USD pair jumped and reached at 1.1263, the highest level in ten days but failed again to hold above 1.1250 and pulled back, erasing daily gains. As of writing trades at 1.1230 flat for the day and with the intraday momentum now favoring the downside.
Up and down
The main driver in today’s price action has been related to the US-China trade tensions. The retaliation measures announced today by China increased uncertainty and investors concerns. Initially lead to a lower US Dollar across the board but then turned to the upside and erased losses as equity prices in Wall Street extended the decline. US stocks are starting the week on a negative note after having last week the worst of the year. The DOW JONES is down 0.45% and the S&P 500 2.51%.
“China today retaliated against Trump's tariffs. On the surface it looks like a measured response but China is also likely to stop purchases of US agricultural goods and other products. However, we believe China will retaliate in a moderate way in order not to provoke a further escalation. We do not expect China to sell US treasuries”, said analysts at Danske Bank. Earlier today, US President Trump said “the unexpectedly good first quarter 3.2% GDP was greatly helped by Tariffs from China. Some people just don’t get it!”
The DXY dropped earlier today to 97.03, the lowest since April 18 but over the last three hours recovered and currently trades at 97.30, marginally lower for the day, far from the lows. At the same time the US Dollar Index bounced to the upside, EUR/USD turned lower.
The 1.1250/60 area continues to be a critical resistance that limited the upside over the last three weeks. A firm break higher could signal more gains ahead. While to the downside, the immediate key short-term support stands around 1.1210. If it declines under 1.1200, the modest bullish bias would be invalidated.
On a wider perspective, Chris Turner from ING said: “Barring a temporary squeeze of short EUR positions, there seems little reason to change the near term view that EUR/USD stays offered this summer and tests 1.10. As we go to press US-China trade tension is unresolved and there is a still a risk that later this month President Trump opts for tariffs on auto imports. Admittedly there are a few green shoots in terms of European growth, but probably not enough to lift Euro area interest rates off the floor. The TLTRO III to be announced by the ECB in June should also cement the view that EUR rates stay lower for longer”.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Geopolitics once again take centre stage, as UK Retail Sales wither
Nearly a week to the day when Iran sent drones and missiles into Israel, Israel has retaliated and sent a missile into Iran. The initial reports caused a large uptick in the oil price.