The pair ended the previous session flat at $1.1078 and is trending lower in early trade on Wednesday, as investors digest the latest in trade headlines whilst looking ahead to the release of the FOMC minutes later today and ECB minutes to be released tomorrow.
Risk sentiment has dipped boosting the safe haven dollar as doubts continue to grow over the ability of the US and China to agree a phase one trade deal. Moves by the US Senate, passing a bill supporting the pro-Democracy protesters in Hong Kong will only aggravate an already very fragile US – China relationship, as will Trump’s threats of further tariff if no deal is done.
FOMC Minutes
Dollar traders will now look ahead to the release of the FOMC minutes. Traders will be keen to see the deliberations from the meeting Oct. 30 where the Fed cut interest rates for a third and final time in this cycle. The minutes come following two testimonies by Fed Chair Powell in Congress, which means that they could be considered slightly old hat and are unlikely to create any major moves in the market.
Slowdown Concerns Still Haunt Euro
Euro investors are still grappling with disappointing data after eurozone construction output missed forecasts and German producer prices also fell short of expectations. Whilst eurozone economic growth remained fairly resilient in the third quarter, concerns remain over whether the bloc can eek out another quarter of growth at the end of the year.
The release of the OECD economic outlook is expected to confirm lacklustre growth in the eurozone. The latest OECD economic projections report back in September pointed to a mere 1.1% growth in 2020 and 1% growth in 2021. The report could reinforce slowdown fears.
ECB Minutes
Looking ahead minutes from the ECB meeting will be eyed closely amid growing unease within the central bank over unlimited quantitative easing. Should the discussions show an increasing resistance to the ongoing easing programme, the euro could receive a boost. Then it will be up to Christine Lagarde to pull governments on-board for a boost in fiscal stimulus.
Levels to watch:
The pair has failed to hold onto to the uptrend which started early October. In failing, the pair has broken through 100 & 50 sma on 4 hr chart, a bearish sign although the 200 sma remains intact.
Immediate support can be seen at $1.1055, prior to $1.1045 and $1.1015. On the upside resistance is seen at $1.1090, $1.1110 before $1.1130.