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Aug 07 - 01:55 PM

EUR/USD - COMMENT-Dollar Gains A Chance For EUR/USD Bulls To Reload

By Christopher Romano  —  Aug 07 - 11:40 AM

EUR/USD fell as rising U.S.-China tech tensions nL1N2F902E hurt risk sentiment, fueling a temporary pullback driven by short-dollar profit taking that could eventually expose more attractive levels for euro bulls to buy.

President Donald Trump's bans on U.S. transactions with the Chinese owners of messaging app WeChat and video-sharing app TikTok nL1N2F9037 escalated U.S.-Sino tensions, made worse after Washington sanctioned Hong Kong Chief Executive Carrie Lam and other officials nL1N2F90T9, sending China's yuan CNH= weakening toward 6.9800 against the dollar.

Flows out of riskier investments and into the safe-haven dollar helped pressure EUR/USD lower, breaking below the 10-day moving average.

But longer-term EUR/USD bulls may benefit.

The U.S. job recovery is slowing despite an above-forecast non-farm payrolls report nL1N2F81T3, which nevertheless firmed U.S. Treasury yields and softened fed funds prices.
Still, rates appeared unlikely to appreciate, which should limit dollar rallies.

Dollar =USD technicals are oversold, indicating consolidation of its drop is likely, but the broader dollar trend remains bearish.

In the short-term EUR/USD could correct lower but a return to the bull trend and test near 1.2000 seems probable.

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Refinitiv IFR Research/Market Commentary


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