The White House believes that you can sacrifice your ideas about the benefits of a weak dollar for the country's economy in favor of the revision of the terms of trade with Beijing. According to the presidential administration, China will sooner or later agree to a deal, since it is not in its interest to destroy its own economy. In most earlier years, China benefited from trade with the United States, and it is time to pay the bill. New terms of trade need to be convenient first and foremost for America.
Thus, Donald Trump's campaign remarks begin to come to life. As a presidential candidate, he promised to be tougher with China than his predecessors. As for the dollar index, its fate will depend on whether trade wars - the United States or other countries of the world - do more harm. If we take into account that the consumer sentiment from the University of Michigan jumped to a peak in the last 15 years, then we can safely say that the slowdown in the first quarter was temporary. Consumer spending in the current quarter may accelerate, and this is a good sign for the economy and the US dollar.
Over the weekend, the trade conflict escalated even more, which is increasingly beginning to correspond to the name "trade wars". If the USD/CNY quotes soar above the psychologically important mark of 7.00, then a repeat of the history of 2015 can happen. Then a massive outflow of foreign capital from the country was recorded. Now the scale of the disaster may be more serious than it was then.
The futures market is extremely sensitive to the US-China conflict. By the end of this year, the risks of reducing the Fed rate increased to 70%, and the likelihood of monetary policy easing by the ECB in the first quarter of 2020 - to 40%. The most dramatic situation in the eurozone, since it is complicated by the elections to the European Parliament.
The position of supporters of the French president was undermined due to mass protests in the country. The victory in the election of Emmanuel Macron in 2017 marked the beginning of a "bullish" trend for the euro. Since then, much has changed, euro skeptics are again in the spotlight. Italian politician Matteo Salvini, who said he was unwilling to comply with EU budget deficit requirements of 3%, demonstrates friendly relations with Marine Le Pen. Moreover, the increase in the yield differential of Italian and German bonds indicates an increase in political risks in the EU. Given the above, the fall in the EUR/USD quotes below $1.1165 looks quite plausible. The next step of euro bears could be its attack of support for $1,113.
Changes in the technical picture also force us to forget about attempts to restore the EUR/USD rate. The main pair did not manage to leave the level above $1.1260. Despite the fact that the chances of continuing to consolidate remain, the risks of resuming the downward trend look stronger. The breakthrough of an important support at $1.1115 threatens to give impetus to the fall. First of all, $1.1050 and $1.0975 marks will be under the gun. On the whole, the EUR/USD's decline towards $1.0755 is not excluded.
The material has been provided by InstaForex Company - www.instaforex.com