Markets seem to have spent the last week and this Monday on the latest developments of US-China Trade tensions. Last week’s Chinese imports to 25% ignited the fire again followed by overnight’s China response to Trump new tariffs.

China is raising tariffs on $60 billion of U.S. goods starting June 1, CNBC reported. As a result, risk aversion sentiment rose sharply across the asset classes.

In response to the latest trade situation, overnight EUR further down against the safe-haven currencies CHF and JPY besides traced out a double top pattern against the USD.

“In light of renewed risks to the global economy due to the US-China trade conflict, EM FX carry trades could be on the back foot over the near-term, and we may see further EUR short covering” Goldman Sachs said in a Macro Strategy note.

Now euro traders and we focus on the May 18 deadline about European cars. Cecilia expects a possible extension “European Trade Commissioner Cecilia Malmstroem expects U.S. President Donald Trump to delay a May 18 deadline for U.S. tariffs on cars imported from the European union, according to an interview published in the Sueddeutsche newspaper on Monday.” Reuters reported.

Data review: In terms of macro data last week, E.Z. Services PMI confirmed subdued growth of euro area continues in April.

  • Final Eurozone Services PMI printed at 52.8 down from 53.3 in March, signaled a slightly slower rate of expansion.

Data preview: Looking at the week ahead, it’s a reasonably busy week for data highlighted by May ZEW Economic Sentiment (Tue), March industrial production, E.A. Q1 GDP 2nd estimate (Wed) and CPI y/y basis (Fri).

TECHNICAL OVERVIEW

EURUSD volatility seems buoyant despite new tariffs either side and downward pressure eased slightly. Interestingly it was immune to the last week’s rough patch.

It has traced out a short-term price top near 1.1265 in early and mid-May via the formation of a double top pattern with support against 1.1200 and 1.1130/1.1100 levels while the price managed to close above 20MA.

The erosion of the double top pattern is highly encouraging all the more, so the daily volatility tends to increase markedly. A break of the last barrier would be needed to initiate a more pronounced recovery to 1.1320 and 1.1340 levels.

The overall, trend remains bearish, and we are still waiting for a break below the level 1.1100 pay pave the way for lower prices back to 1.1050 its C point of the A-B-C corrective structure

As discuss above tariffs on European cars, and European elections are the two risk factors we focus on, before taking a long trade.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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