EUR/USD picks up pace and approaches 1.1200, focus remains on trade

• The pair stays sidelined around the 1.1200 milestone today.
• US-China trade negotiations keep ruling markets’ sentiment.
• US Producer Prices, Fed’s Powell coming up next.

The sideline theme remains unchanged around the European currency in the second half of the week, with EUR/USD hovering around the 1.1200 neighbourhood.

EUR/USD upside capped by 1.1220, 21-day SMA

Spot keeps navigating within a tight range so far this week, with the weekly upside so far limited by the 1.1220 region, where sits the key 21-day SMA.

In the meantime, markets remain focused on the US-China trade dispute amidst the recent deterioration in talks and ahead of the visit of Chinese negotiators to Washington in order to resume talks and hope for a deal sooner rather than later.

In addition, and still on the trade scenario, investors will be closely following events in Washington as an increase in tariffs for Chinese products (from 10% to 25%) worth $200 billion is expected to kick in tomorrow.

Nothing expected data wise in the Old Continent today, whereas Producer Prices and Initial Claims are due across the Atlantic followed by speeches by Chief Powell and FOMC’s Bostic and Evans.

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 0.05% at 1.1197 and a break above 1.1264 (high May 1) would target 1.1263 (55-day SMA) en route to 1.1323 (high Apr.17). On the downside, immediate support aligns at 1.1135 (low May 3) seconded by 1.1109 (2019 low Apr.26) and finally 1.0839 (monthly low May 11 2017).