EUR/USD Price Forecast – EUR/USD at 1.16 Handle as Investors Await China’s Response to US Tariff

EUR/USD had virtually no reaction following the release of the FOMC meeting minutes. The euro is currently supported by easing trade anxieties as German Chancellor Merkel indicated a willingness to discuss potential tariff reductions. The first lift in German factory orders this year also provided some support. This more positive tone was reinforced by firm US economic data, which continue to suggest economic momentum remains intact heading into Q3. On Thursday, the shared currency continued benefitting from the overnight news that some ECB members believe that raising rates by the end of 2019 would be too late. The positive move was further supported by reports that US President Donald Trump could abandon his threatened tariffs on imported cars from the EU if the bloc eliminates duties on the US cars.

EURUSD Steadfast

Adding to this, persistent US Dollar weakness, with disappointing ADP report adding to the bearish tone, provided an additional boost and lifted the EUR/USD pair to over one-week high level of 1.1720. The USD selling abated following the release of ISM non-manufacturing PMI, which unexpectedly rose to 59.1 in June as compared to 58.6 in the prior month. Meanwhile, the latest FOMC June meeting minutes showed that policymakers remain wary over intensifying trade disputes but were still on track for gradual monetary policy tightening cycle, albeit did little to provide any meaningful lift to the greenback.

However EURUSD moved back into 1.16 handle in early Asian market hours as the new US tariffs on $34 billion worth of Chinese imports is already in effect from 0400 GMT and Trump has threatened to impose an additional $500 billion tariffs if Beijing opts for retaliatory measures, risking retaliation of a potential full-blown US-China trade war. The US Greenback traded mixed against EURO through the Asian session on Friday amid concerns over trade spat between the world’s two largest economies. Aside from trade related news, market is also scheduled to see updates from economic calendar such as report (NFP) might influence the USD price dynamics and contribute towards making it a rather volatile end of the week. The US economy is expected to have added 195K new jobs in June and the unemployment rate is seen at record lows of 3.8%, while wages are expected to remain subdued, up monthly basis 0.3% and by 2.8% y/y. Expected support and resistance for the pair are at mid-1.1700s while 1.1650 area is likely to protect the immediate downside and is followed by supports near the 1.1630-25 region and the 1.1600 handle.