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Trade War Concerns Hit EURUSD, Nears Critical Support Levels

Trade War Concerns Hit EURUSD, Nears Critical Support Levels

2018-08-07 09:30:00
Martin Essex, MSTA, Analyst and Editor
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EURUSD price, news and analysis:

  • Trade war worries are boosting USD and weakening EUR.
  • As a result, EURUSD is close to important support levels and if it breaks below them steep further losses could follow.

Our trading forecasts for Q3 have been published; you can find the EUR guide here.

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

Trade war concerns keep EURUSD under downward pressure

Continuing concerns about a US-China trade war are continuing to boost the US Dollar while weakening the Euro. That has sent the EURUSD price close to important support levels and, if they break, further losses would be highly likely.

On the USD side of the equation, the US Dollar is seen increasingly as a safe haven thanks to a relatively strong US economy and a belief that tariffs would narrow the US trade deficit. Meanwhile, worries that Italy will boost its spending and some poor industrial output data from Germany continue to weigh on the Euro.

EURUSD Price Chart, Daily Timeframe (June 12, 2017 – August 7, 2018)

Latest EURUSD price chart.

Chart by IG

Budget talks began in Rome last week and an increase in spending would potentially increase Italy’s deficit next year. Meanwhile, German industrial production fell by 0.9% month/month in June, according to the latest data – a sharper fall than the 0.5% predicted and in stark contrast to the downwardly revised 2.4% increase recorded the month before.

EURUSD chart

From a technical perspective, the EURUSD chart above shows the pair has already broken through support from a triangle pattern but has stabilized Tuesday after six successive daily falls. Even so, it remains close to support from the May 29 low at 1.1510 and the June 21 low at 1.1508.

A drop through those levels could take EURUSD back to levels last seen in July 2017, suggesting further steep losses are now possible.

Trade wars: more to read:

A history of trade wars

The impact of tariffs on the economy

What’s behind US-China tariffs

The US-China trade war

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--- 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

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