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Trade War: No Respite for EURUSD as US-China Trade Talks Resume

Trade War: No Respite for EURUSD as US-China Trade Talks Resume

2018-05-17 13:30:00
Martin Essex, MSTA, Analyst
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Trade talking points:

- The potential for a trade war continues to be a major influence on the FX markets as US-China trade talks resume in Washington.

- So far, that has done little to help EURUSD, which could well extend its recent losses.

Check out the IG Client Sentiment data to help you trade profitably.

And for a longer-term outlook take a look at our Q2 forecast for EUR.

Trade talks in focus as US and China meet

The potential for a trade war continues to overshadow the foreign exchange markets as US-China trade talks resume in Washington. They are expected to be tough and so far EURUSD remains under pressure and could well extend its recent losses.

EURUSD Price Chart, Daily Timeframe (Year to Date)

EURUSD price chart showing impact of trade war.

Chart by IG

Trade wars aside, the USD continues to benefit from its interest-rate advantage over German Bunds, the benchmark for Euro-Zone bonds, with the yield on the 10-year US Treasury note reaching a seven-year high above 3.1% before easing back a tad.

On the other side of the coin, Italian politics continue to be negative for the Euro, as does the relative weakness of the Euro-Zone economy. This all suggests further downside for EURUSD, although there is one warning signal on the chart above: the 14-day relative strength index, or RSI, is back below the 30 level that suggests the pair has been oversold.

Further reading on trade wars

At DailyFX we have published several articles on the subject that you might find useful. These include:

The Impact of Tariffs and Trade Wars on the US Economy and the Dollar

A War to Trade More, Not Less - What’s Behind US-China Tariffs

Why International Trade News Matters for Foreign Exchange Rates

US China Trade War & a Brief History of Trade Wars – 1900 until Present

Resources to help you trade the forex markets

Whether you are a new or an experienced trader, at DailyFX we have many resources to help you: analytical and educational webinars hosted several times per day, trading guides to help you improve your trading performance, and one specifically for those who are new to forex. You can learn how to trade like an expert by reading our guide to the Traits of Successful Traders.

--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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