EUR/USD Daily Forecast – Euro Wipes Out Bulk of Friday’s Gain

Risk Appetite Appears to Be Fading

The single currency caught a boost on Friday after concerns over a trade war between China and the United States escalated. Comments from Trump early this week that a deal is coming has caused EUR/USD to give back most of its gains.

The appetite for risk faded somewhat on Tuesday as investors questioned Trumps early week comments. Officials from China have insisted that they did not reach out to put trade talks back on the table. Nevertheless, China is ready to work towards a resolution. The S&P 500 stalled out near some important resistance and posted a small loss yesterday.

Similarly, the drop in EUR/USD appears to be losing some momentum. At the same time, buyers were unable to hold the exchange rate above a key 1.1100 level yesterday which suggests weakness.

The exchange rate was weighed yesterday by the release of better than expected consumer confidence figures in the United States. Earlier today, consumer climate figures out of Germany, a measure of confidence based on surveyed consumers, also came in ahead of expectations.

The session ahead is light in terms of economic data releases that stand to trigger volatility to the exchange rate. Tomorrow, GDP figures will be released from the US and CPI data from Germany will be announced.

Technical Analysis

The failure to hold above the 1.1100 price point on Tuesday might deter near-term EUR/USD bulls from getting involved here. It will probably take a push back above the level to signal a turn higher.

While below it, the next area of interest marked on my chart falls at 1.1075. EUR/USD is showing some signs of exhaustion as the pair traded mostly sideways during the European and US overlap yesterday until finally breaking slightly lower in late-day trading.

Bottom Line

• Volatility seems to be slowing. Further developments in the trade war between China and the US stands to change that.
• We might see a more meaningful move in the pair on Thursday as important data from Germany and the US can trigger a volatile reaction.
• Technical support at 1.1075 might hold the downside today. 1.1100 marks important resistance in the session ahead.