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  • The pair looks for direction around the 1.1200 handle.
  • US-China trade negotiations remain in centre stage.
  • German data, Draghi next of relevance in the docket.

The single currency is prolonging the choppy performance so far this week and is now taking EUR/USD to the 1.1200 region while the US-China trade dispute continues to dominate the mood in the markets.

EUR/USD focused on trade, Draghi

Spot is extending the sideline theme on Wednesday, always around the key barrier at 1.1200 the figure and against the backdrop of rising effervescence on the US-China trade dispute.

In fact, escalating tensions between the US and China over the trade war has been supporting increasing inflows into safe havens currencies and supporting the demand for bonds, dragging yields of the German 10-year Bunds to multi-week lows near -0.04%. This, in turn, has morphed into extra oxygen for the buck via wider yield spread differentials.

Today’s calendar in the euro area includes German Industrial Production figures and the speech by ECB’s Draghi in Frankfurt, although he is unlikely to mention monetary policy. There will be no publications across the pond, only the speech by FOMC’s L.Brainard (permanent voter, dovish).

What to look for around EUR

Recent data in Euroland and Germany allowed market participants to believe that some healing process could be under way in the region amidst the ongoing slowdown. However, this scenario needs confirmation in the next months, while the current ‘neutral/dovish’ stance from the ECB is expected to persist for the reminder of the year and probable H1 2020. The broad-based risk-appetite trends and USD-dynamics are posed to rule the sentiment surrounding the European currency for the time being, all in combination with the onoging US-China trade dispute and potential US tariffs on EU products. On the political front, headwinds are expected to emerge in light of the upcoming EU parliamentary elections in late May, as the populist option in the form of the far-right and the far-left movements appears to keep swelling among voting countries.

EUR/USD levels to watch

At the moment, the pair is gaining 0.13% at 1.1206 and a breakout of 1.1264 (high May 1) would target 1.1266 (55-day SMA) en route to 1.1323 (high Apr.17). On the downside, immediate contention emerges at 1.1135 (low May 3) seconded by 1.1109 (2019 low Apr.26) and finally 1.0839 (monthly low May 11 2017).