EUR/USD defends 1.1000 ahead of key data, Powell’s testimony

• EUR/USD off four-week lows but downside risks persist.
• USD/CNY’s rise amid trade uncertainty could limit the EUR bulls.
• Focus stays on Eurozone data, US CPI and Powell’s testimony.

EUR/USD trades better bid above the 1.10 handle ahead of the European open, having defended the last on several occasions in the overnight trades, Bears now await the key US inflation report and Federal Reserve (Fed) Chair Powell’s testimony for the next push lower.  

EUR/USD: 5-DMA at 1.1025 to limit the recovery gains?

The spot is seen somewhat benefitting from a pause in the broad-based US dollar rally after the US President Trump’s latest comments failed to offer any fresh details on the US-China trade deal while increasing the trade anxiety. The US dollar index trades around a flat line near 98.30, consolidating the rise to four-week tops of 98.42.

Despite the tepid bounce, EUR/USD remains vulnerable and risks falling below the 1.1000 level, tracking the weakness in the Chinese Yuan vs. the US dollar, as the trade uncertainty led China economic slowdown fears continue to weigh heavily on the Chinese currency. Note that China is Europe’s biggest export market and the bloc’s remains at a competitive disadvantage should the Yuan depreciate.  

From a technical perspective, the 5-DMA barrier at 1.1025 is likely to restrict the recovery attempts while the downside sees the next support near mid-October lows at 1.0991. A break below which open floors for a test of the 1.0950 level. The sub-1.1000 levels could be tested on likely improvement in the US Consumer Price Index (CPI) due for release at 1330 GMT.

Ahead of the US inflation report, the German Final CPI figures, Eurozone Industrial Production data and trade developments could offer some trading impetus to the prices. However, the main event risk for Wednesday remains Powell’s testimony on the economic outlook before the congressional Joint Economic Committee at 1600 GMT.

EUR/USD Technical levels to consider