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  • EUR/USD buoyed by optimism over a possible resolution to the US-China trade dispute, rising Bund yields and a clean bill of health for Italy from Fitch’s unchanged BBB rating.  
  • EUR/USD has started to drift sideways, losing upside momentum and capped by the 21-D SMA, supported at S1.  

The mood was positive in European markets following a series of positive spin headlines following six days of trade negotiations between the US and China that continued over the weekend. President Donald Trump announcing that the US will delay imposing further trade tariffs on Chinese goods. The subsequent effect saw a lift in European equities and the value of the euro – EUR/USD firmed between a range of 1.1326 and 1.1367. Additionally, the Bund yields were also 1.4bps higher at 10.7bps as investors piled into shares. The euro was also supported following Fitch’s confirmation of an unchanged BBB rating for Italy – (BTPs jumped with the yield on the 10-year falling 7bps to 2.77%).  

A  trade pact could happen soon

“President Trump said that a trade pact could happen soon and that both sides were very, very close to a deal. He also said that tariffs that are due to come into effect on March 1 would be delayed. This news is unambiguously positive if a deal can indeed be taken to the line, though there were reports from Chinese media that talks would be harder at the final stage, and disappointment is still very possible,” analysts at ANZ Bank explained.  

EUR/USD levels

Analysts at Commerzbank explained that EUR/USD spent much of last week sidelined in its range:

“We look for it to remain underpinned by the 1.1216 November low but it is currently stalled at the 20-day ma. Our attention remains on the 1.1513 200 day ma. It is again expected to creep higher this week. Above the 200 day ma will re-target the 1.1623 mid-October high and slightly longer term we look for gains to 1.1685, the 55-week ma.”