On Monday the 5th of August, trading on the EURUSD pair closed up. The day’s dominant theme was the ongoing trade dispute between the US and China.
On Friday the 2nd of August, Donald Trump announced that tariffs on Chinese goods would go up by 10% on the 1st of September. On Monday, the yuan shed 1.77% against the dollar. The stock market took a dive while gold, the yen, the Swiss franc, and bitcoin all rose.
During the US session, the US government officially labelled China a currency manipulator. China responded by halting the import of US agricultural produce. This has led to fears among investors that the trade conflict is set to continue for a while.
With a correction taking place on the safe haven assets, the EURUSD pair has corrected from the U3 line to 1.1190. There are currently no technical factors favouring a stronger euro; its rise is on account of geopolitical developments. China is showing no sign of backing down, while Trump is looking for new ways to pile on the pressure. It looks like the standoff between the two countries is set to continue, so keep an eye on the stock market, safe havens, the yuan, and Trump’s Twitter account. Trump has been the catalyst for the market’s most recent movements.
The EURUSD pair corrected by 45 degrees. The 67th degree and the trend line are sitting slightly lower at around 1.1175. At the time of writing, the pair is trading at 1.1205. I expect the pair to slide to 1.1180 followed by a recovery amounting to 76% of the drop from 1.1235. The economic calendar is virtually empty.