EUR/USD: Trade tensions could keep gains under check ahead of US NFP release

Drop in Italy-German yield spread likely put a bid under the EUR on Monday. However, escalating trade tensions capped gains 1.1659.
The common currency could revisit the previous day's high if the Italy-German yield spread drops further and EM currencies stabilize.
August highs above 1.17 could be put to test if the US wage growth figure prints well below estimates.

Omkar Godbole FXStreet Contributor

The EUR/USD rose to a high of 1.1659 yesterday, possibly on the back of a drop in the 10-year Italy-German yield differential.

However, the bullish mood turned sour on reports that the Trump administration is now steering towards imposing additional tariffs on $200 billion worth of Chinese imports, having put a 25 percent levy on $50 billion worth of Chinese goods in July. As a result, the currency pair surrendered gains and closed at 1.1622.

The common currency could pick up a bid today if the Italy-German yield spread continues to slide, implying that the market pessimism over the Italian budget is receding.

However, a break above the previous day's high of 1.1659 may remain elusive, courtesy of escalating US-China trade tensions. Moreover, China is likely to retaliate in kind if the US goes ahead with the fresh round of tariffs.

That said, a big rally towards 1.1733 (recent high) could be in the offing if the US average weekly earnings and non-farm payrolls figure for August, scheduled for release at 12:30 GMT, misses estimates by a wide margin, adding credence to the argument put forward by the likes of Fed's Bullard that the central bank should stop raising rates now.

On the other hand, a big beat on the wage growth figure would reinforce hawkish Fed expectations, driving the US dollar higher across the board. The Eurozone second-quarter GDP, due for release at 09:00 GMT, could also move the EUR pairs.

Read - Nonfarm Payrolls preview: too much trouble somewhere else

EUR/USD Technical Levels

Resistance: 1.1659 (previous day's high), 1.17 (psychological hurdle), 1.1733 (Aug. 28 high)

Support: 1.1615 (50-day moving average), 1.1585 (Aug. 31 low), 1.1530 (Sep. 4 low)

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bearish	Neutral	High
1H	Bearish	Neutral	Low
4H	Strongly Bearish	Neutral	Shrinking
1D	Bearish	Neutral	Shrinking
1W	Bearish	Neutral	Low
Updated Sep 7, 04:15 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

AUD/USD consolidates above 0.7200 after hot Chinese CPI data

AUD/USD is extending its consolidative price action above 0.7200 during the Asian session on Wednesday, uninspired by hot Chinese CPI and PPI data. Meanwhile, rising RBA rate-hike bets act as a tailwind for the Aussie amid Yen-inspired US Dollar weakness. Traders await the release of US inflation figures later in the week for fresh impetus.

USD/JPY: Bearish impulse falters around 153.00

USD/JPY remains under pressure, down for the third consecutive day on Wednesday, and trading in levels last seen in mid-February near 153.00. Solid Japanese data earlier in the day seem to have reinforced expectations that the BoJ will continue normalising monetary policy, lending further support to the Yen.

Gold regains balance above $4,400

Gold rebounds on Wednesday, snapping a three-day losing streak and reclaiming the are beyond the key $4,400 mark per troy ounce. The precious metal’s bounce comes amid further selling pressure on the US Dollar and steady uncertainty on the geopolitical front.

XRP extends recovery as ETF inflows, futures interest stabilize

Ripple (XRP) ticks higher, trading at $1.42 on Wednesday while building on a recently confirmed support range between $1.30 and $1.35. The token also sits above major moving averages, reinforcing the bullish outlook. However, upside could remain capped unless the psychological barriers at $1.50 and $1.70 are cleared, paving the way for an extended recovery above $2.00.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.