Date: 26 Jun 2018

The move in EURUSD back above 1.1700 is proving supportive of arguments from some technical analysts that the pair has formed a base at 1.1508. Indeed even that the EURUSD upside move in Asia on Tuesday ran into some congestion around 1.1720 was explicable by the fact that 1.1721 was the 61.8 per cent Fibonacci retracement of the downmove from 1.1853 to 1.1508. Analysts at IFR on Tuesday morning were arguing that, from a technical perspective, a clear break of 1.1725 could open up a move back to 1.1850, while pointing to the present 21-day moving average at 1.1679 as a possible support level. On a macro-level the French bank Credit Agricole wrote today that being short EURUSD amidst a global trade war might not be such a safe bet.

The French firm’s view is that a trade war could “prove less damaging for the Euro zone recovery over the long-term especially if the economic rebound remains driven by domestic demand” and that “US protectionism will most likely play out as a drag on global (including US) growth,” that there is some evidence “US businesses are starting to signal concerns about the negative impact
of President Trump’s trade policies” and that consequently “appetite for the divergence trade that has propelled USD higher across the board in recent weeks may be starting to wane.” It remains to be seen whether the market as a whole will agree.

Written by Neal Kimberley, External Currency Analyst.