EUR/USD sits near flat levels close to 1.1200 after erasing earlier gains
The pair made a high of 1.1250 but fell off after as the euro was sold following a more steady yuan fixing by the PBOC as well as a massive CNH bill issuance to support the currency.
In my view, the drop doesn’t invalidate the move higher just yet as it is merely markets scaling back on the move over the past two days. In the bigger picture, the general repercussions of the US-China trade fallout remains somewhat similar.
Trade tensions are set to escalate further and although we may not be accelerating towards a currency war just yet, we’re not exactly moving away from one either.
In the instance of EUR/USD, the upside move has stalled at the 100-day MA (red line) @ 1.1231. However, sellers will need to do more work to gain back some momentum to drive price lower again from here.
As it stands, the corrective move seems to be stalling near the 1.1200 handle with the 23.6 retracement level offering some support for buyers.
In my view, as long as price continues to hold above the key hourly moving averages (seen closer to 1.1120-30), there is still room for buyers to maneuver to the upside. As such, the 100-day MA @ 1.1231 is a key level to watch out for in the coming sessions.
A break above that will open up a potential move towards the 200-day MA and the 1.1300 handle. That will be a big level to watch out for if we do get there.
In the mean time, buyers will still be poised to challenge for a move higher unless the US-China trade rhetoric improves significantly from here – which is unlikely.