- EUR/USD prints a four-day winning trend on dollar sell-off.
- Uptrend intact, but Sino-US tensions and coronavirus concerns pose risk.
- The bid tone may weaken ahead of the EU parliament’s ratification of the recovery fund.
EUR/USD registered gains for the fourth straight trading day on Wednesday, reinforcing the bullish bias put forward by last week’s convincing move above the long-held resistance of the 200- week simple moving average.
The currency pair is bid near 1.1575 at press time with the 15-minute chart reporting a falling wedge breakout, a bullish continuation pattern. As such, one may argue that the uptrend is likely to continue on Thursday.
However, take note that the US dollar could attract haven bids due to the escalating Sino-US tensions, signs of worsening of the coronavirus outbreak in the US, and fiscal deal impasse in Washington.
The United States on Wednesday ordered China to close its consulate in Houston amid accusations of spying, marking an unprecedented deterioration in relations between the world’s two biggest economies. Further, President Trump said that it was “always possible” other Chinese missions could be asked to close, according to Reuters news.
Meanwhile, the US state of Texas set one-day records for increases in coronavirus deaths and hospitalization on Wednesday. In addition, Republicans and Democrats in Congress continue to struggle to pass a fourth coronavirus aid package.
These factors may dent risk sentiment and weigh over EUR/USD. The single currency has rallied by 1.34% this week on broad-based dollar sell-off and due to optimism stemming from the European Union’s decision to approve the highly-anticipated EUR 750 billion recovery fund.
The EUR bulls may now turn cautious as the fund needs to be ratified by the EU parliament and some observers fear that politicians the national parliaments may not approve of the size of the final budget.
On the data front, the focus would be on the forward-looking German Gfk Consumer Confidence Survey (August) and ECB’s De Guindos Speech. Across the pond, the weekly US jobless claims are scheduled for release.
Technical levels
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