On Tuesday the 7th of May, trading on the EURUSD pair closed down. The bulls couldn’t withstand the safe haven retreat for long. In the US session, the pair dropped to 1.1167.
The euro tumbled in response to the European Commission downgrading its economic outlook for the Eurozone, as well as to the escalation of the US-China trade dispute.
The European Commission downgraded its GDP forecast for this year from 1.3% to 1.2%. The forecast for 2020 was revised downwards from 1.6% to 1.5%. This took the euro down to 1.1185 against the dollar.
US Trade Representative Robert Lighthizer and Secretary of the Treasury Steven Mnuchin confirmed that tariffs on Chinese good will go up on Friday.
The dollar also got support from comments by the Fed’s Vice Chairman Richard Clarida, who said that the Fed is in a good place and now is not the time to cut interest rates.
Day’s news (GMT+3):
- 11:15 UK: BoE’s Ramsden speech.
- 11:45 Eurozone: non-monetary policy ECB meeting.
- 14:30 Eurozone: ECB President Mario Draghi’s speech.
- 15:15 Canada: housing starts (Apr).
- 15:30 US: Fed’s Brainard speech.
- 17:30 US: EIA crude oil stocks change (3 May).
The pair has rebounded from the 45th degree. The majors are all trading up against the greenback except for the Kiwi dollar, which has dropped in response to the RBNZ slashing the cash rate to 1.5%.
The 45th degree is at the 1.1220 mark. This level is bolstered by the resistance drawn from the highs of 1.1219 (2nd of May) and 1.1218 (7th of May). It’s highly doubtful that the bulls will be able to break through this at the first attempt given the increased tensions in the US-China trade conflict.
Today’s economic calendar is relatively empty. The euro could fluctuate a bit during Draghi’s speech at 14:30 (EET). In order to move towards 1.1245, we’ll need another bounce from the LB. The stochastic should reenter the buy zone while the pair drops to 1.1197.