- The EUR/USD is marginally higher on the day, not entirely taking advantage of the risk-on sentiment.
- Worries about growth counter hopes for better outcomes on trade and Syria counter.
- The technical picture is fairly balanced for the pair.
The EUR/USD is trading around $1.2330, a few pips higher on the day. The mood in markets is positive. Tensions around Syria are easing as the US and Russia seem to be working on some type of coordination. In addition, US President Donald Trump hinted that action might not be imminent.
There is some hope also on global trade. After China and the US exchanged pleasantries early in the week, China reported a surge in imports from the US in its trade balance report. Alongside a surprising trade deficit for March (mostly due to seasonal reasons), the US Administration may be less keen on acting against its trade partner. Moreover, Trump has reportedly asked his new economic adviser Larry Kudlow to examine re-entering the Trans-Pacific Partnership (TPP) which he abandoned in his first days in office.
On this background, the safe haven Yen is falling, and other currencies such as the Pound are rallying against the US Dollar. However, the euro is left out.
The main narrative is that growth in the euro-zone has peaked in December and the story is gaining ground. Apart from forward-looking PMI data, the hard data such as industrial output published on Thursday also supports it. Industrial Production fell by 0.8% in February, far worse than expected.
Another reason is the dovishness of the European Central Bank. The ECB Meeting Minutes reiterated that the removal of some of the dovish bias in the statement “should not be misunderstood” as a sign the ECB is about to tighten. ECB President Mario Draghi had already downplayed the change in March, but the reiteration of this message weighed on the euro. Also, ECB member Jan Smets called for patience and said that there is more slack in the markets than earlier perceived.
All in all, the EUR/USD is left out of the party.
Later today, the University of Michigan’s Consumer Sentiment is the critical event, implying how active American shoppers were in the current month of April.
See: US Michigan Consumer Sentiment´s preview and its relation with EUR/USD
And How to trade the US Consumer Sentiment data with EUR/USD
EUR/USD Technical Picture
The EUR/USD has no clear direction with the currently limited trading ranges. The pair clings to the 50-day Simple Moving Average while the RSI is marginally above 50 and Momentum is slightly negative.
However, the broader picture shows lower lows and also lower highs, indicating a downtrend.
Support awaits at the April 12th lows of $1.2300, also a round number. Further below, the March lows of $1.2240 and $1.2210 are next.
Looking up, the April 11th swing high of $1.2395 caps the pair. It is followed by $1.2480 seen in late March and $1.2555 which is the three-year high.