EUR/USD battered by Trump’s new tariffs, looking to the lows

• The EUR/USD fails in its attempts to recover on a fresh move in the trade war.
• The ECB also keeps the pressure on the common currency.
• The technical picture is bearish and we are far from oversold conditions.

The  EUR/USD  is trading below 1.1600, down on the day after an early attempt to recover failed. The primary driver is the news about new tariffs on Chinese goods worth no less than $200 billion. China has responded angrily by saying the US is out of its senses. Stocks markets reacted negatively with significant falls in Asia that carried through to Europe.

The safe haven Yen advanced and commodity currencies fell, following the usual response. The difference this time is that also the Euro and Pound are suffering in a deeper risk-off reaction. The $200 billion number seems to have pushed stocks and major currencies over the top.

Will it last? So far, the Trump Administration is taking a hard line on trade and things could worse with the implementation of some of the tariffs and counter tariffs planned for early July. See:  Trump’s trade wars: where we are and 3 dates to pencil on 3 fronts

On the other hand, Trump is sensitive to stocks markets and things could change.

Another significant event for the EUR/USD is the speech by Mario Draghi, the President of the European Central Bank, in Sintra, Portugal. Draghi hit the euro five days ago with a dovish post-rate decision speech. He basically repeating the same words, which have a diminished effect at the moment.

Later in the day, the US publishes Housing Starts and Building Permits. Both figures would need to move in the same direction in order to trigger a meaningful impact on the US Dollar. With markets worried on trade, the Wall Street open may have a stronger effect than the data. S&P futures are pointing sharply lower at the time of writing.

EUR/USD Technical Picture – Bearish

The technical picture is decidedly bearish with downside Momentum and an RSI which points to additional drops, below 50, and still above 30, not in oversold territory.

The EUR/USD is approaching the lows of 1.1543 seen on June 15th, which may provide a first test of the downside. The 2018 low of 1.1510 is already a more significant cushion. Further down, 1.1480 was a key level in July 2017 and it is followed by 1.1420.

Looking up, 1.1610 is a weak resistance level and 1.1650 is more substantial after supporting the pair on May 25th and capping the recovery earlier in the day. Further above, 1.1730 is notable.