- EUR/USD has kicked off the week with minor gains.
- Reports that China is planning a limited offer to the US weighs on markets.
- Monday’s four-hour chart is showing that EUR/USD is on the edge of an uptrend support line.
Is China taking advantage of President Donald Trump’s troubles? The world’s second-largest economy has reportedly prepared the US an offer of a limited scope ahead of high-level trade talks on Thursday. According to Bloomberg, Beijing has skipped the sensitive topics of industrial planning and intellectual property ahead of negotiations in Washington.
Policymakers in China may see a weaker US administration that is ready to compromise. During the weekend, additional whistleblowers have considered stepping forward and providing vital information for Democrats’ inquiry into the Ukraine-gate scandal. Opinion polls have shown growing support for impeaching the president, but probably far from convincing Republicans to abandon their standard-bearer.
Further revelations are likely this week, in the fast-moving political drama. If more Americans support ousting the president, markets may react. Currently, China may be acting in anticipation of compromises – Trump may seek to calm markets and improve his approval rating. The surprising American retreat from northern Syria – abandoning the Kurds and allowing Turkey to come in – may also be seen as a sign of weakness by China.
Worsening relations between the world’s largest economies increase the chances of the Federal Reserve cutting rates later this month, and that may weigh on the Dollar. On the other hand, the risk-off sentiment sends investors to the safety of the Greenback. The American currency is losing ground to the yen, but gaining ground against risk currencies such as the Australian Dollar.
EUR/USD looking for clues
What about EUR/USD? The jury is still out, but perhaps data will help it take a decision – and that data is damp. German Factory Orders dropped by 0.6% and 6.7% in August. While the monthly figures have beaten expectations, the drop and the miss in the yearly figures weigh. The euro-zone Sentix Investor Confidence due out later today is expected to show another deterioration in business sentiment.
Apart from that figure, the economic calendar is light. Jerome Powell, Chair of the Federal Reserve, will speak late in the day, but he will likely refrain from addressing monetary policy. Late on Friday, Powell reiterated that the US economy is “in a good place.”
The world’s most powerful central banker spoke after the US Non-Farm Payrolls report for September was mixed. The economy gained 136,000 jobs, but revisions to previous months added 45,000 positions. Wage growth disappointed with 0% monthly and 2.9% yearly, while the Unemployment Rate the Underemployment Rate dropped to new lows. Markets are expecting a rate cut later this month, but it is far from a done deal.
EUR/USD Technical Analysis
EUR/USD is trading alongside an uptrend support line that has accompanied it since the beginning of the month. Break or bounce? Other indicators are mixed. While momentum is pointing to the upside, EUR/USD was rejected at the 100 Simple Moving Average.
Resistance awaits at 1.10, which is not only a round number but also capped the pair twice in recent days. Further up, 1.1025 was a swing high in late September. It is followed by 1.1075, which held it down earlier last month, and then by 1.1115.
Support awaits at 1.0965, which separated ranges in recent weeks. It is followed by 1.0926, which was a double bottom. Next, we find 1.0905, which provided support in late September, and finally, the 2019 low of 1.0879.
Image Sourced from Pixabay