Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.1400.
- Add a stop-loss at 1.1675.
- Timeline: 1-2 days.
Bullish View
- Buy the EUR/USD pair and set a take-profit at 1.1675.
- Add a stop-loss at 1.1400.
The EUR/USD exchange rate remained under pressure as traders assessed the impact of the ongoing trade war between the US and China. It pulled back to a low of 1.1543, down by 2.95% from its highest point this year.
China-US Trade Conflict Impact Seen Limited
The EUR/USD pair has come under pressure as traders assessed that the impact of the ongoing trade war between the United States and China.
Analysts and investors anticipate that the current trade war will be limited as the two sides understand the implications. China has tools to limit the US manufacturing as it controls about 90% of rare earth materials.
The US, on the other hand, has more tools that it may deploy to limit Chinese ambitions. For example, COMAC, the country’s main aircraft company, relies on General Electric engines.
The main catalyst for the EUR/USD pair this week will be statements from some Federal Reserve officials, especially Jerome Powell, the Chair. These officials will provide more hints on what to expect in the coming meetings.
In a statement on Monday, Anna Paulson, the head of the Philadelphia Fed, hinted that she favored two more cuts this year. Other top Fed officials like Michele Bowman, Christopher Waller, Susan Collins, and Jerome Powell will talk today.
Their statements come at a time when the US is going through a government shutdown and a data drought. The Bureau of Labor Statistics (BLS) did not publish the non-farm payrolls (NFP) data this month. It has, nonetheless, committed to publishing the consumer inflation report.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD exchange rate has pulled back in the past few weeks. It has dropped from the year-to-date high of 1.1920 on September 17 to the current 1.1570.
The pair has dropped below the 50-day Exponential Moving Average (EMA). It has also slowly formed a small bearish flag pattern, which is a common continuation sign. It is hovering slightly above the 23.6% Fibonacci Retracement level, while the MACD indicator has dropped below the zero line.
Therefore, the pair will likely continue falling as sellers target the key support at 1.1395, its lowest point in August. This view will be confirmed if it drops below the 23.6% retracement point at 1.1500.
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