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  • Dollar drops against most majors as gold hits 7.5-year highs.
  • German minister calls for a temporary ban on Chinese takeovers. 
  • Escalation of the US-China or EU-China tensions could cap the upside in EUR/USD.

Gold’s rally to multi-year highs is likely weighing over the US dollar and pushing the EUR/USD higher on Monday. 

The currency pair is currently trading at 1.0823, representing a 0.10% gains on the day, having put in a low of 1.0807 during the Asian trading hours. 

Meanwhile, Gold is trading at $1,760, the highest level since November 2018, and is reporting nearly 4% gains from the low of $1,693 observed on May 12. Notably, the yellow metal is flashing green for the fifth straight day. 

The metal seems to be drawing bids, possibly in response to the escalating tensions between the US and China on the coronavirus outbreak. Further, Federal Reserve’s President Powell said over the weekend that the US economy may need more support from both the central bank and Congress. 

The sustained uptick in gold, a hard currency with limited supply, looks to be fueling broad-based losses in the dollar. For instance, growth-linked currencies like the AUD and NZD are reporting 0.4% gains against the US dollar. 

Looking ahead, the upside in EUR/USD could stall if China objects to the German minister’s appeal to the European Union to block Chinese takeovers of companies. 

“We have to see that Chinese companies, partly with the support of state funds, are increasingly trying to buy up European companies that are cheap to acquire or that got into economic difficulties due to the coronavirus crisis,” said Manfred Weber, a senior German conservative and head of the center-right EPP grouping in the EU Parliament, according to Reuters. 

Moreover, the US-China trade tensions are already on the rise and could weigh on risk assets. On the data front, German Bundesbank’s Monthly Report is scheduled for release on Monday. Across the pond, the focus will be on the NHB Housing Market Index (May). 

Technical levels