Should the U.S. and China wage a fresh trade war EUR/USD could gain support. Deepening division between Washington and Beijing at a time of great global uncertainty is likely to burnish the appeal of other relatively safer currencies like the euro, especially if distanced from the fight.
China's introduction of new Hong Kong security legislation has seen the United States swiftly remove the territory's special status with China pledging to retaliate nB9N2DN01S.
EUR/USD traders are already bullish and predisposed to buy dips within a new technical uptrend, though are currently cautious due to concern regarding Europe's planned recovery fund.
That said, both Germany and France are optimistic differences will be resolved at a July 17-18 summit nL1N2E70AH.
If the plan is passed EUR/USD could rally strongly towards 1.18-1.20.
If not, the EU is much more likely to kick the can down the road than reject a deal altogether.
As such there's risk of deeper dips but likely not a reverse.
A sustained drop below 1.10 seems unlikely.
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