EUR/USD: Focus on three-week-old support line, below 1.0800, amid risk aversion
- EUR/USD extends pullback from 100-bar SMA.
- US Dollar registers broad strength amid trade/virus fears.
- EU-German tussle, the recent spike in German virus data weigh on the regional currency.
EUR/USD remains on the back foot around 1.0795, down 0.13% on a day, amid the early Tuesday’s trading session. While the tension between the German and European policymakers weighed on the pair earlier, fresh fears of the US-China trade war and the coronavirus (COVID-19) resurgence seems to have weighed on the pair off-late.
The US dollar gains bids since early Asia when US President Donald Trump closed door for any renegotiations over the Phase 1 terms of the US-China trade deal.
The German court’s ruling on the European Central Bank’s (ECB) lack of proportionality over the stimulus usage seems to have recently been exerting downside pressure on the regional currency.
Also, the latest data suggesting an increase in German virus cases after the economic re-open could be considered as a negative factor for the pair.
As a result, the risk-tone sentiment remains heavy and favors the greenback’s safe-haven demand.
Moving on, traders will keep eyes on the US inflation data, in addition to the virus/trade updates, for near-term direction.
EUR/USD four-hour chart
The pair nears a three-week-old rising support line, at 1.0775 now, while also staying below 100-bar SMA level of 1.0850. Considering the repeated bounces off the trend line support, coupled with the weak conditions of RSI, the pair could take another U-turn towards 1.0850 immediate resistance. If the quote fails to reverse from 1.0770, April month low near 1.0730 will be on the bear’s radar. It should additionally be noted that a falling trend line from March 30, at 1.0985, acts as the key upside barrier during the pair’s rise past-1.0850.
Trend: Pullback expected