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  • The EUR/USD and USD/CNH are displaying a high degree of correlation.
  • The EUR could take a beating if CNH drops on renewed trade concerns.
  • The American dollar may also pick up a bid if Fed’s Powell sounds hawkish.

The EUR/USD is on the defensive, having closed yesterday below 1.1315 (61.8% Fib R of 1.1215/1.1472).

The bearish close happened as hawkish comments from Fed’s Clarida and rising trade tensions put a bid under the US dollar.

Bull breakout in USD/CNH could prove costly for the EUR

Trapped in a narrowing price range, the USD/CNH pair (offshore yuan exchange rate) charted a doji candle yesterday, signaling indecision in the marketplace, even though Trump said on Monday that it was “highly unlikely” he would accept China’s request to hold off on the increase, which is due to take effect on January 1.

The CNH’s resilience in the face of renewed trade concerns puts a question mark on the sustainability of losses seen in the EUR/USD yesterday. This is because, the correlation between the two pairs has risen from 0.45 to 0.77 in the last few days.

The strengthening correlation also means the EUR could take a beating if the USD/CNH sees a symmetrical triangle breakout on rising trade tensions.

Fed’s Powell is scheduled to speak at 17:00 GMT

The bid tone around the US dollar may strengthen if Fed Chair Powell reaffirms gradual path of tightening and says the rates would have to move above the neutral level for some time. The EUR/USD, however, may draw bids if Powell puts more emphasis on the rising risks to the US economy.

The preliminary estimate of the US third-quarter GDP, scheduled for release at 13:30 GMT, and the ECB speak also influence the pair.

EUR/USD Technical Levels

EUR/USD

Overview:
       Today Last Price:  1.1294
       Today Daily change:  -2.0  pips
       Today Daily change %:  -0.0177%
       Today Daily Open:  1.1296
Trends:
       Previous Daily SMA20:  1.1362
       Previous Daily SMA50:  1.1473
       Previous Daily SMA100:  1.154
       Previous Daily SMA200:  1.178
Levels:
       Previous Daily High:  1.1346
       Previous Daily Low:  1.1277
       Previous Weekly High:  1.1473
       Previous Weekly Low:  1.1328
       Previous Monthly High:  1.1625
       Previous Monthly Low:  1.1302
       Previous Daily Fibonacci 38.2%:  1.1303
       Previous Daily Fibonacci 61.8%:  1.1319
       Previous Daily Pivot Point S1:  1.1267
       Previous Daily Pivot Point S2:  1.1238
       Previous Daily Pivot Point S3:  1.1199
       Previous Daily Pivot Point R1:  1.1336
       Previous Daily Pivot Point R2:  1.1375
       Previous Daily Pivot Point R3:  1.1404