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  • EUR/USD fades the earlier spike to the 1.1170/75 band.
  • DXY moves further north of the 98.00 mark.
  • Fedspeak, trade, data on focus later in the day.

The European currency remains unable to sustain any bullish attempt for the time being, leaving EUR/USD vulnerable to further downside.

EUR/USD fragile on trade fears, USD-buying

Spot has resumed the broad leg lower sparked after last week’s rejection from tops beyond 1.1260, eroding yesterday’s gains and re-shifting the focus to a potential challenge of YTD lows in the 1.1100 neighbourhood.

As usual, US-China trade jitters remain the almost exclusive driver behind the pair’s price action along with souring sentiment on the geopolitical front, where Iran and the US are playing key roles.

Earlier in the session, ECB’s Vice President Luis De Guindos warned that the ongoing slowdown in Euroland could motivate banks to increase their capital buffers. He also noted that the current momentum in Euroland risks tail events.

Nothing worth mentioning data wise in the euro bloc, whereas Existing Home Sales for the month of April and speeches by FOMC’s Evans and Rosengren are due across the ocean.

What to look for around EUR

Recent data releases in Euroland and Germany have poured cold water over the idea that some healing process could be under way in the region, re-shifting the focus to the ongoing slowdown and its probable duration and extension. In the meantime, the current ‘neutral/dovish’ stance from the ECB is expected to persist for the remainder of the year and probable through H1 2020. The broad-based risk-appetite trends and USD-dynamics should dictate the sentiment surrounding the European currency for the time being, all in combination with the now stalled US-China negotiations and potential US tariffs on EU products. On the political front, Italy has re-emerged as a source of uncertainty and volatility, while investors’ focus has now shifted to the EU parliamentary elections next week.

EUR/USD levels to watch

At the moment, the pair is losing 0.17% at 1.1146 and faces the next support at 1.1135 (low May 3) seconded by 1.1109 (2019 low Apr.26) and finally 1.0839 (monthly low May 2017). On the other hand, a break above 1.1239 (55-day SMA) would target 1.1264 (high May 1) en route to 1.1302 (100-day SMA).