- Key SMA has put brakes on EUR/USD’s pullback from Thursday’s high.
- Asian stocks drop on below-forecast China data, still, the dollar fails to draw bids.
- Stalled talks on a US coronavirus stimulus bill weigh over the greenback.
EUR/USD remains sidelined above the 200-hour simple moving average (SMA) as the safe-haven dollar is struggling to draw bids despite the risk-off tone in the Asian stock markets.
China data disappoints expectations
Data released early Friday showed China’s industrial production rose 4.8% from a year earlier in July. While the output expanded for the fourth straight month, it missed expectations for a 5.1% year-on-year rise.
Meanwhile, retail sales dropped 1.1% on-year, worse than a predicted 0.1% expansion. The data poured cold water over the optimism generated by the deceleration in China’s factory deflation signaled by the producer price index released earlier this month and weakened the risk sentiment in the Asia markets.
So far, however, the dollar has failed to draw haven bids. The greenback is struggling possibly due to worries about a delay in the additional US fiscal stimulus.
Talks in Congress stalled with no signs of progress after a pivotal call between House Speaker Pelosi and Treasury Secretary Mnuchin, as noted by BK Asset Management’s Kathy Lien. According to Pelosi, Democrats and the White House are “miles apart”, meaning the deal is still far away.
As such, EUR/USD could continue to trade above the 200-hour SMA, currently at 1.18 – more so, as the Sino-US tensions have eased somewhat in the past 24 hours. White House economic adviser on Thursday said that the Trump administration is satisfied with China’s progress in meeting commitments to purchase the US goods in a Phase 1 trade deal, strengthening hopes that the pact will survive an initial review on Saturday.
The shared currency, however, may come under pressure in Europe, if the Eurozone Gross Domestic Product, due at 09:00 GMT, shows a bigger-than-expected economic contraction in the second quarter. Later in the day, the focus would shift to the US Retail Sales data.
EUR/USD is trading at 1.1812 at press time. The pullback from Thursday’s high of 1.1864 ran out of steam at the 200-hour SMA support of 1.18 during the Asian trading hours.
Technical levels
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