EURUSD Steady Ahead of US-China ‘Phase One’ Trade Deal

The Euro held steady against the US Dollar, finding comfort around 1.12 ahead of the all-important phase one trade deal between the US and China.
Bilal Jafar

In the last full trading week of 2019, the Euro gained around 0.8% against the Greenback as the Dollar lost ground against major currencies, after US President Donald Trump announced the date for the US-China phase one trade deal. Given how the long-awaited trade agreement between the countries will be signed on January 15, this is certainly a welcome development for financial markets. Despite the lack of details on what are the terms that will be included into the phase one agreement, investors remain cautiously optimistic over the deal easing tensions between the two largest economies in the world.

Trade deal optimism boosted risk sentiment, ultimately pushing global equity markets to record highs as investors shifted their focus to higher-risk assets. The Dollar Index reached its lowest level in six-month below 96.80 on Tuesday. Although Euro lost around 2% against the US Dollar in 2019 due to US-China trade uncertainty, domestic risks in Europe and Brexit, the currency has displayed resilience over the past four months. With the European Central Bank maintaining an accommodative monetary policy to stimulate inflation, investors will keep a close eye on inflation data throughout 2020. Euro Area inflation rate was confirmed at 1.0% in November 2019 with markets projecting consumer prices to jump 1.2% in December.

On the technical side, EURUSD on the 4-Hour timeframe has been following an uptrend since 20 December. The price jumped above the key level of 1.12000 and registered the highest level of period under study at 1.12402 on December31. As of writing, the price is hovering around 1.2232 with positive MACD and Momentum above the 100 level. The price is currently trading above the 50 period simple moving average with RSI above 50 which supports the recent bullish price movement. Resistance level lies at 1.12402 while the support level lies at 1.10648. Bulls are trying to keep the price above 1.12000, but a close below the psychological level of 1.12000 could strengthen the argument for bearish movement.

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