After a sharp fall to start the week, EUR/USD is seeing some buying activity from support in early trading on Tuesday.
Friday’s surge in EUR/USD followed a series of events that made it clear that progress was not being made in the trade war between the US and China. Yesterday, this sentiment shifted as President Trump said that trade talks will resume.
The Euro, being a funding currency, has been susceptible to risk and has seen fairly wild swings on the back of the recent shifts in sentiment. Perhaps this is not as clearly seen in EUR/USD as it is in other currency pairs.
Take EUR/CAD, for example, The pair surged higher to a one-week high on Friday but then reversed lower yesterday to touch a three-week low. Price action during this period will tend to be the most volatile in currency pairs that include a very low yielding currency against a high one.
Headlines related to trade will continue to impact the markets. One in thing in particular that might have an impact on the session ahead has to do with Trump’s recent comments. He said on Monday that he received a phone call from Chinese officials that they are ready to talk. China’s foreign ministry has denied the call several times already. At the same time, they are encouraging Washington to come back to the table.
GDP figures out of Germany reflected a decline of 0.1% in growth during the second quarter which was expected. The Euro did not have a significant reaction to the data release.
Earlier in the day, consumer confidence in France was reported at an 18 month high. Confidence figures from the US are scheduled for release later in the day.
EUR/USD has held above a significant confluence of support. In play is the psychological 1.11 handle as well as the 50 and 20 moving averages on a 4-hour chart.
It seems likely that this support area will contain the pair for the session ahead. The first area of resistance comes in at 1.1118. I see a strong level at 1.1138, this level held the pair lower on Friday.
Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.