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EUR/USD Pulls Back Amid Escalated US and China Tensions

EUR/USD Pulls Back Amid Escalated US and China Tensions

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EUR/USD edged lower on Tuesday as the US dollar crawled back. The EUR to USD exchange rate dropped to 1.0200, which was lower than the intraday high of 1.0300. The greenback has

The US dollar rose modestly as tensions between the US and China escalated. House Speaker, Nancy Pelosi will travel to Taiwan on Tuesday. China escalated the rhetoric ahead of Pelosi’s trip by launching several missiles near the Taiwan Strait.

It is unclear what will happen once the speaker arrives and leaves the country. Most analysts believe that China is preparing to attack Taiwan in the coming years. Investors tend to move to the safety of the US dollar when there are elevated risks.

Meanwhile, data from the US showed that the number of vacancies dropped sharply in July. The economy had over 10.69 million vacancies, down from the previous 11.3 million. Therefore, this is a sign that the labor market is tightening as companies struggle.

The US will publish the latest jobs non-farm payrolls (NFP) later this week. Analysts expect the data to show that the country’s economy added over 300k jobs in July while the unemployment rate remained at around 3.6%.

On the data front, the currency pair will be reacting to the euro zone’s retail sales scheduled for release on Wednesday. On a year-on-year basis, economists expect a reading of -1.7% compared to the prior month’s 0.2%.

Earlier in the week, data showed that Germany’s retail sales volumes declined by 8.8% in June YoY. This is the largest annual decline on record for the continent’s leading economy.  

EUR/USD technical analysis


As shown on its daily chart, the EUR/USD pair appears to be losing its positive momentum even as the bulls remain in control. After hitting parity against the US dollar about two weeks ago, the Euro has since bounced back by about 2.79%.

It is hovering around the 25-day exponential moving average for the second session in a row.  Even so, it remains below the 50-day EMA. At the time of writing, it was at 1.0234 after hitting an intraday high of 1.0299.

In the short term, EUR/USD will likely continue to hover around 1.0250. As such, the range between 1.0148 and 1.0304 will be worth watching for the remainder of the week. A bounce back in the US dollar may give the bears an opportunity to retest last week’s low of 1.0094.  

Even with further rebounding, I expect it to continue finding resistance along the 50-day EMA at 1.0362 in the ensuing sessions. Learn more about how to .

Crispus Nyaga
Crispus Nyaga
Crispus is a financial analyst with over 9 years in the industry. He covers the stock market, forex, equities, and commodities for some of the leading brands. He is also a passionate trader who operates his family account. Crispus lives in Nairobi with his wife and son.