Euro Price Chart: EUR/USD Uptrend on Verge of Collapse

2019-11-05 07:00:00 Dimitri Zabelin, Analyst

US Dollar Outlook, EUR/USD – Talking Points

The US Dollar could suffer if key industrial data misses again
Manufacturing sector has been under pressure from trade war
EUR/USD uptrend may be on verge of collapse: selloff ahead?

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APAC Recap

The Australian Dollar rallied along with APAC equities at the expense of the Japanese Yen early into Tuesday’s Asia trading session after news broke that the US is considering peeling back some of its tariffs against China. Investors rejoiced on the prospect that levies totaling $112 billion could be repealed and lead to more fruitful US-Sino trade negotiations.

EUR/USD Eye Key US Data

EUR/USD’s October 1 uptrend may be in jeopardy of a fatal break as the pair hovers dangerously close to the lower lip of the support zone. As noted on Monday, negative RSI divergence, while not a guarantee of reversal, is showing slowing upside momentum. A slew of US industrial data could either catalyze a downside breakout if it triggers the Greenback’s appeal as a haven-linked asset or saps capital away from USD and buys the pair.

The latter scenario may be more likely because the current environment is currently placing a discount on anti-risk assets like the Japanese Yen and US Dollar. This is counter to what we have seen for most of 2019 where the US Dollar’s rise was being fueled by an urgency to hold highly-liquid assets in the face of deteriorating global growth prospects.

With trade tensions easing and anxiety about Brexit temporarily subsiding, investors are feeling more inclined to prioritize returns over assets with high liquidity. However, this respite may be short-lived if fundamental risks that have haunted markets for most of 2019 make a reprisal. If they do, EUR/USD may resume its prior downtrend at an accelerated pace, potentially undoing all the progress it made during the October uptrend.

Market Analysis of the Day: EUR/USD Uptrend in Danger of Breaking?