FX.co ★ EUR/USD. "EU is as bad as China": Trump's words interrupted the upward offensive

The fundamental background for the euro-dollar pair changes at a kaleidoscopic speed. Despite the dominance of bullish sentiment, EUR/USD bears are not going to give up without a fight. Sellers use any more or less significant news reason to slow down the growth of EUR/USD, although they are not yet able to reverse the trend. However, their counter-attacks bear fruit: for example, they did not allow the pair's bulls to approach the 19th figure today, although there were all the prerequisites for this since the morning. But in the afternoon, the fundamental background for the euro was overshadowed by US President Donald Trump's remarks. Therefore, buyers had to postpone their attack on the 19th price level.

What happened?

Before the coronavirus pandemic, the main topic for traders was the trade war between the United States and China. The negotiation epic lasted for several years and ended last fall with the signing of the first part of the trade deal. In the shadow of this trade conflict was (and still is) another – between the US and Europe. It has also been smoldering for several years – almost as long as Trump is "at the helm". Periodically, he recalls this trade standoff, threatening Brussels with additional duties and other "punishments from heaven". This conflict is heterogeneous – for example, the head of the White House in 2018 threatens to impose additional duties on European cars and spare parts. The automotive industry is under attack not only in Germany, but also in France and Italy.according to preliminary estimates, the total cost of these duties is worth 300 billion dollars. These intentions remained intentions, but the other line of conflict – in the sphere of aircraft construction – ended with the introduction of additional duties for billions of dollars.

Washington voiced its claims to the Europeans in April 2019: according to the White House, a number of European countries (France, Italy, Spain and Germany) illegally subsidized the European aircraft manufacturer Airbus, causing the American state annual damage worth 11 billion dollars. The United States then only threatened to impose additional duties on a number of goods from the above-mentioned European countries. A little later – in October 2019 – Brussels lost a dispute at the World Trade Organization over subsidies for Airbus. This fact became the next stage in the trade standoff between the US and the European Union. Washington has imposed additional tariffs worth $7.5 billion, sanctioned by the WTO, on a number of goods imported from the European Union. In particular, a 10% tariff was imposed on civil aircraft, and a 25% tariff was imposed on food and alcoholic beverages.

The United States has just announced that it has extended the additional duties. However, with a few changes: Washington excluded some products from the UK and Greece from the list, including "a comparable volume of products from France and Germany". A detailed list of products is not yet available, but in the context of the currency market, this is not so important. But another reminder of the tense trade relations between the US and the EU had a negative impact on the euro. Especially since Trump also focused on this.

"The EU is as bad as China": many journalists around the world put this particular phrase from Trump in the headlines of their publications. In an interview with Fox Business, Trump quite harshly criticized the EU, saying that the EU "uses the US". Initially, it was about payments to the NATO budget, but then the American president recalled the trade relations between Washington and Brussels. Against the backdrop of such rhetoric, some experts have suggested that the trade war between the United States and the EU will continue, thereby aggravating the situation of the world economy.

Although there is no consensus among analysts on this issue, the European currency was still under some pressure. Buyers of the EUR/USD pair could not continue the upward offensive, retreating to the bottom of the 18th figure.

How do I trade?

At the moment, the pair is showing a downward correction after rising to a local high of 1.1864 (current week's high). The growth in prices was due to pessimistic comments by Federal Reserve representatives and "silence" in the US Congress. Earlier this week, Treasury Secretary Steven Mnuchin promised that talks over a new stimulus package would resume, but "things are still there." Such a fundamental background allowed the pair's buyers to overcome the resistance level of 1.1805 (Tenkan-sen line on the daily chart) and head towards the 19th figure.

Now the bears are trying to bring the price back under the above level. Therefore, the 1.1805 target is now a key level: if buyers can stay above it, they will again head towards the 19th figure. Otherwise, bearish sentiment will intensify, and the pair may drop to the support level of 1.1710 (middle line of the BB indicator on the daily chart).