EUR/USD: Trump saves the euro from critical support, yet risks persist
No to a virtual debate – that is the headline that has come out of President Donald Trump’s first live interview since he contracted coronavirus. Yet markets are less interest in next week’s potential political clash, but rather the fate of more federal funds to revive the economy – and here, Trump’s message was more upbeat, lifting the euro.
The Commander-In-Chief said that House Speaker Nancy Pelosi wants a deal. The man behind “The Art of the Deal” used the same phrases when negotiating the trade accord with China before going for the Phase One agreement. Is Pelosi genuinely willing to compromise or is Trump revealing his own urge to cut a deal? For markets, the answer does not seem to matter.
The safe-haven dollar is under pressure and EUR/USD escaped critical support at 1.1740, but it can break resistance at 1.1780? Pelosi will be speaking with US Treasury Secretary Steven Mnuchin for the umpteenth time later in the day, and there are reasons to doubt a deal is reached.
First, Democrats want a generous $2.2 trillion deal and Republicans aim for a mini-accord focusing on airlines and checks to all Americans – with Trump’s signature on them. The gap may be too big – at least today – and markets may be disappointed.
Secondly, Senate Republicans may have reached the conclusion that Trump is about to lose the vote, and may move to stick to their long-forgotten principle of keeping the deficit low and focusing on what matters more – the Supreme Court nomination.
Third, Dems have no reason to give ground after Trump’s own goal on Tuesday, when he cut off talks with the opposition. They may let him continue struggling.
Elsewhere, jobless claims marginally estimate with 840,000 applications, while continuing claims beat estimates by dipping below 11 million. The European Central Bank’s meeting minutes seemed to consist of more attention to the exchange rate than usual – but repeated known stances. The ECB does not target the value of but watches it carefully.
Overall, the fate of US fiscal stimulus is left, right, and center, and after the recent rise, it may turn down.
EUR/USD Technical Analysis
The 59 and 100 Simple Moving Averages converge at 1.1740, making it a critical support line. The currency pair dipped below that level but has not lost it. Nevertheless, upside momentum, has waned and EUR/USD trades below the 200 SMA.
Further support awaits at 1.1725, 1.1685, and 1.1625.
Strong resistance is at 1.1780, which held euro/dollar twice in the past few sessions. It is followed by 1.1810 and 1.830.