EUR/USD: Risk-off threatens to derail three-day winning streak

EUR/USD drops as the decline in the US stock futures puts haven bid under a dollar.
Risk sentiment takes a hit on rising US-China tensions.
Trade war fears return as Trump renews tariffs threat to China.

Omkar Godbole FXStreet Contributor

EUR/USD is flashing red at press time and could end the day on a negative note, snapping a three-day winning run due to risk aversion and the broad-based demand for the US dollar.

At press time, the pair is trading near 1.0940, representing a 0.33% drop on the day. The pair rose 0.48%, 0.75%, and 0.24% on Wednesday, Thursday, and Friday, respectively.

The S&P 500 futures are down 0.56% at press time and WTI is reporting more than a 3% drop on the day. The dollar is again benefitting from the anti-risk mood in the financial markets. The dollar index, which tracks the value of the greenback, against majors, is trading at session highs above 99.30, representing a 0.67% rise on the day.

US-China tensions rise

The markets turned risk-averse in Asia as the Trump administration stepped up the anti-China rhetoric over the weekend by stating the world's second-largest economy is responsible for the coronavirus pandemic.

The US intelligence agency accused China of hiding the severity of the virus outbreak in order to stock up on medical supplies needed to respond to the virus. Meanwhile, President Trump said late Sunday that tariffs would be an ultimate punishment for China.

Political experts think President Trump would continue bashing China ahead of the Presidential Elections due later this year in order to shift focus from the criticism he is facing at home for the handling of the virus crisis.

Focus on German PMI

The German Markit Manufacturing PMI (Apr), due at 07:55 GMT, is forecasted to have remained unchanged at 34.4. A below-50 reading indicates contractions. A big beat on expectation may put a bid under the common currency.

Technical levels

1. R3 1.1106
2. R2 1.1063
3. R1 1.1022
PP 1.0978
1. S1 1.0938
2. S2 1.0894
3. S3 1.0853

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD revisits 1.1780, or daily lows

EUR/USD now comes under further selling pressure, breaking below the 1.1800 support to reach daily troughs on Thursday. The pair’s decline comes in response to a sudden bout of USD strength amid steady geopolitical tensions. Ealier in the day, the ECB’s Lagarde delivered cautious remarks, although the currency remained apathetic.

GBP/USD retreats from tops, approaching 1.3540

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