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Risk Appetite on Trade War Optimism. EUR/USD

Nov 5 2019, 10:04 PM (+06) |

Risk appetite has returned to the financial market as the two largest economies continue to inch towards a trade agreement. The anticipated meeting in Chile where U.S. President Donald Trump and China President Xi Jinping were planning to sign the “phase one” trade deal was cancelled last week due to protests. There have been different proposals for a new location, one of the options being considered was President Xi Jinping’s visit to the United States for signing the agreement. Tariffs continue to play a big role in negotiations, and China seeks to cut the tariffs imposed by the US. The additional round of tariffs that is to be imposed on December 15th is also an important discussion topic. China is also considering holding the sanctions on up to $3.6 billion of US goods, which the World Trade Organization had recently approved of. While the phase one of the agreement is being finalized, U.S. government is issuing licenses to some companies that sell components to China’s tech giant Huawei. 

On Friday, China lowered the market reference rate for new short-term bank loans from 4.25% to 4.20% to help companies hit by the trade war.

Outlook in the euro zone is also slightly positive as soon as there are less chances of a no deal Brexit, at least in the near future as election campaigns take center stage. 

Yesterday, the EU’s manufacturing PMI Oct was better than expected in Italy (47.7), France (50.7) and Germany (42.1).

Christine Lagarde made her first speech as European Central Bank president yesterday in Berlin. She refrained from discussing the monetary policy, calling instead for “strength, resolve and courage”. In her message to Europe she states this is “a call to remember our better selves and not to allow self-doubt to drag us down.”

Christine Lagarde is the former Managing Director of the International Monetary Fund who started her eight-year term as President of the ECB on November 1st.

On the 4H TF for EURUSD, the price broke below the 50-EMA and is now using it as a strong resistance level at around 1.11283. The pair is now testing a support level at the 23.6% Fibo around 1.11086. The 9-EMA is pointing down, getting ready to cross the 50-EMA down. The MACD intersected yesterday, and the histogram is showing a strong bearish momentum. The Parabolic SAR is pointing down as well.

Resistance: R1 1.11283, R2 1.11755

Support: S1 200EMA around 1.10797, S2 38.2% Fibo 1.10647, S3 50% Fibo 1.10293

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