EUR/USD trims losses near 1.1200, attention stays on US-China trade

• The pair moves higher and tests the 1.1200 area.
• The greenback navigates within range around 97.50/60.
• US-China trade concerns remains in centre stage.

 The initial risk-off tone appears to have subsided somewhat during the European afternoon, with EUR/USD managing to regain some composure around the 1.1200 region.

EUR/USD keeps looking to trade for near term direction

Spot has managed to abandon the area of daily lows near 1.1180 amidst some recovery in the risk appetite trends, while a drop on US-GE yield gap is also collaborating with the rebound in the pair.

In fact, yields of the US 10-year reference dropped to fresh lows in the sub-2.50% area, taking the spread differential vs. their German peers to the lower bound of the range around 247 pts, favouring the bullish attempt in spot at the same time.

In the meantime, all eyes remain on the US-China trade negotiations (or absence of them) as the almost exclusive drivers of the price action so far this week.

Earlier in the session, positive results from the euro docket saw the Sentix index and Retail Sales in Euroland coming in above expectations, also supporting the shared currency somehow.

Across the pond, the speech by Philly Fed P.Harker (2020 voter, hawkish) on Economic Outlook should keep the attention on the buck ahead of the publication of Producer Prices (Thursday) and the CPI (Friday).

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 losing 0.01% at 1.1200 and faces the next support at 1.1109 (2019 low Apr.26) seconded by 1.0839 (monthly low May 11 2017) and finally 1.0569 (monthly low Apr.10 2017). On the other hand, a break above 1.1264 (high May 1) would target 1.1271 (55-day SMA) en route to 1.1323 (high Apr.17).