- EUR/USD is gradually losing ground alongside global stock markets.
- US-Sino relations remain tense, and EU leaders are divided on divvying up the top jobs.
- The four-hour technical chart shows that momentum turned negative.
EUR/USD may have peaked out early in the week as it extends its gradual downfall. The world’s most popular currency pair is pushed down by EU disagreement and also pulled down by USD strength – stemming from trade tensions.
Leaders of the European Union met on Tuesday to take stock of the results of the elections. Germany’s Angela Merkel – who aims to cling to power in her country – wants her fellow compatriot and party member Manfred Weber to lead the European Commission. On the other side of the fence, French President Emmanuel Macron – losing to the populists in his own country but forming part of the growing Liberal bloc – wants a fresh face at the top.
Merkel, Macron, and other leaders are not only negotiating the top EU job but also other critical jobs. For euro traders, the most important post is that of the president of the European Central Bank.
Political analysts are laying out two options. In the first, Germany’s Weber is appointed as EC President, and the next ECB president will be a dove, perhaps France’s Benoit Coeure – an adverse scenario for the euro. If Germany concedes on the EC post, it may push to appoint current Bundesbank President Jens Weidmann at the helm of the ECB or settle for a like-minded hawk – a scenario that may be favorable for the common currency.
At the moment, uncertainty weighs on EUR/USD.
US-Sino relations remain tense as China has repeated its threat to limit exports of its vast rare earth deposits. Moreover, new stories about the blame for the rupture in trade talks also depress stocks and strengthen the dollar – despite a lower return on US bonds. The rush to safe-haven US Treasuries pushed yields lower – in theory making the greenback less attractive. However, the American currency remains a safe-haven asset that is sought in times of trouble.
And while investors are cautious, consumers seem more confident. The US Conference Board’s consumer confidence survey has risen to 134.1 points in May, better than had been expected.
The economic calendar does not feature any significant events today – leaving the stage to politics.
EUR/USD Technical Analysis
Momentum on the four-hour chart turned negative, and the Relative Strength Index is leaning lower as well. Moreover, the recent slide has sent EUR/USD below the 50 Simple Moving Average.
The bears are back.
Initial support is at 1.1150, which was a temporary low last week, and it is followed by 1.1135, which was a swing low early in May. The all-important 2019 low of 1.1107 is next.
Some resistance awaits at 1.1190, which was a swing low last week. Next up we find this week’s peak of 1.1218 and the triple-top of 1.1265.