Source: Forex Analysis
EUR steadied as Germany’s PPI index performed better than expected showing a 0.5% increase, surpassing estimates of a 0.2% increase. However, recovery for the region remains fragile as trade tensions between China and US escalates. Zhang Ming, China’s envoy to EU indicated that China will retaliate against Trump’s recent order to restrict Huawei and ZTE corporations from doing business in US and warns of China’s unwavering resolve to fight US bullying saying that “We’ve been holding for 5000 years, why not another 5000 years?” Meanwhile, Trump vowed to prevent China’s economy from surpassing US, indicating that he is “very happy” with the trade war. With the trade negotiations collapsing entirely and world’s 2 largest economies showing signs of a slow down, as seen in the latest retail sales data, this could hamper EU’s recovery in the manufacturing sector and stall economic growth with its heavily export-dependent economy.
Elsewhere, rising populism added to the weakening sentiment as Italy’s ruling populists have repeatedly threatened to break European Union’s budget rules and a strong performance by Salvini could spur greater volatility for the currency as it would mean another budget clash with the European Commission, adding on the global uncertainty.
Italy market would also take the biggest hit with Salvini’s emergence as “it implies persistent widening pressure on Italian bonds, with investors using relief phases to offload risks rather than treating dips as buying opportunities” according to Michael Leister, head of rates strategy at Commerzbank AG.
Stop loss : 1.1117
Take profit : 1.1174
Today we’re seeing that EUR/USD is very close to major support at 1.1136 and a strong bounce could occur from here pushing prices up to our 1st resistance level at 1.1174. It’s important to note that Stochastic is also at a corresponding support level which increases our confidence on this trade.
The material has been provided by InstaForex Company – www.instaforex.com