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EUR/USD Daily Price Forecast – EUR/USD Rebounds Post Hitting 13-Month Lows on US-China Trade Talks

By:
Colin First
Published: Aug 16, 2018, 05:11 UTC

EUR/USD rebounds from 13-month lows as major global currencies including EURO got a bullish boost in Asian market hours on news of Sino-US Trade talks.

EURUSD Thursday

Riskier assets and the EUR scored gains in Asian market hours due to the news that Chinese officials will be traveling to the United States for trade talks in late August. As of writing this article, the EURUSD pair is trading at 1.1384 up 0.33% on the day, after hitting 13 month Low at 1.13009 during yesterday’s trading session. A Reuters report released earlier today quoted China’s Ministry of Commerce as saying that a Chinese delegation led by Vice Minister of Commerce Wang Shouwen will hold talks with US representatives led by Under Secretary of Treasury for International Affairs David Malpass later this month. The announcement seems to have boosted risk assets. For instance, the AUD/USD is up 0.40 percent and the USD/JPY is reporting marginal gains despite the BOJ rate hike talk. As a result, the EUR turned higher in Asia and could extend gains further in the European and US session if the equities react positively to the news of US/China trade talks.

News of Sino-US Talks Has Curbed Selling Activity Surrounding Chinese Yuan

Trade war fears had morphed into an opportunity for speculators, who had been selling the Yuan and other currencies against the dollar. The news that pointed to a possible easing of U.S.-China trade tensions appears to have curbed such activity. But there is no guarantee that the trade discussions will end successfully. As such, the trade news may have stopped the speculators’ selling but perhaps only for the time being. The greenback had drawn strength after a tough week for emerging market currencies, initially led by the rout in the Turkish lira. The currency plunged to an all-time low at the start of the week as tensions between Ankara and Washington flared and worries over President Tayyip Erdogan’s economic policies increased. The lira has since recovered to 5.9725 per dollar after slumping to a record low of 7.24 on Monday.

With multiple factors in play, market is expected to see more volatility surrounding major global currencies as risk appetite in currently high in market. Thus US Greenback is expected to see sideways movement as investors flock to major global currencies. Technically speaking, a close today above 1.1355 would validate the previous day’s dragonfly doji candle and confirm a bearish-to-bullish trend change. The relative strength index (RSI) is also rising from the overbought territory. So, while there is a reason to be optimistic here, the bulls are still cautioned against being too ambitious as the US Treasury has not responded to the announcement from Beijing. Expected support and resistance for the pair are at 1.1357, 1.1336, 1.1301 and 1.1400, 1.1433, 1.1460 respectively.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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