Tariff Fears Spook Investors, Trigger Market-Wide Selloff
EUR/USD: Two Weak Hands Battling It Out. Choppiness Ahead?
The trade war took center stage again last week after President Trump reignited tariff woes by threatening new 100% levies on China. The President also said he will likely cancel a planned meeting with China’s President Xi Jinping after China revealed plans to expand its control over rare earth minerals exports.
The US Dollar Index (DXY) took a hit on Friday, dropping from 99.4 to a low of 98.8. The index measures the performance of the US Dollar against a basket of 6 major counterparts, with the Euro holding most of the weight.
But even if the DXY had a rough day, it was nothing compared to the crypto market, which saw more than $18 billion wiped out in a matter of hours. On Friday, Bitcoin went from above $122K to $109K before recovering slightly and closing the day at $113K. For other cryptocurrencies, the drop was even more drastic: Binance Coin (BNB) dropped to a low of $891 after having traded at $1,355 just three days earlier. It has since recovered and is trading around $1,150. Ripple’s XRP dropped as low as $1.30 on some exchanges but quickly recovered and is currently trading around $2.35.
The S&P 500 had one of the worst days in history on Friday, dropping from a high of $6,760 to a low of $6,550. That’s huge, considering the S&P 500 has many days during which the price change is less than $100.
Economic Calendar Highlights
The U.S. government is still in shutdown mode, which means that economic data may be delayed or postponed. The NFP is still not out, and there is no plan to release it, at least at the time of writing.
Fed Chair Powell will speak on Tuesday at 4:20 pm GMT at the National Association for Business Economics Annual Meeting. Audience questions are expected, but the event may go largely overlooked unless the Fed Chair has some surprising takes.
The U.S. Retail Sales numbers are scheduled for release on Thursday at 12:30 pm GMT, but the event is marked as “Tentative” due to the government shutdown. The PPI and Core PPI reports should be released at the same time, but these are also market “Tentative”.
Technical Outlook – EUR/USD
The uptrend hit a ceiling at 1.1900, and the latest tariff scare is probably not enough to fuel a significant rally above this barrier. The greenback took a hit from the reigniting of the trade war, but the euro is not in the best of places either, which could create a stalemate for the pair.
The price is currently bouncing off the support at 1.1600 and off the lower Bollinger Band, which sets up the stage for a move into the next point of interest, which is 1.1700. In the short term, the dollar is under pressure, so we may see bullish moves for the pair, but the overall look is still bearish. A clear break below 1.1600 will probably send the pair into the 1.1400 zone.
