The EUR/USD pair has retreated on Friday morning, May 22, following the path taken in the previous session. On Thursday, dollar appreciation snapped the pair’s four-day winning streak.
To remind, since last Friday until Wednesday the euro firmed 1.6% against the dollar mainly on the back of a proposal made by France and Germany to establish a EUR 500 bn recovery fund that would provide grants to the regions and sectors hardest hit by the coronavirus pandemic.
On Thursday, the dollar, as a defensive asset, went on the offensive against key rival currencies as worries resurfaced about the state of the global economy during the pandemic, and under the influence of an escalation in US-China relations.
As regards macro data, yesterday’s numbers showed that the US economy continues to shed millions of jobs. Initial US jobless claims for the past week amounted to 2.438 mn vs. 2.687 mn (revised) a week earlier.
Meanwhile, President Donald Trump’s rhetoric continued to keep market participants on edge. This time he pledged that the US would react harshly if China imposes tough national security laws in Hong Kong in response to protests.
Before this, there was a number of disagreements between the US and China, starting from access for Chinese companies to advanced technologies and the origin of the coronavirus. At this stage, another reason for confrontation favors the dollar as an anti-risk asset.
From a technical standpoint, the daily chart shows that EUR/USD, in line with our expectations, bounced off the upper line of the 1.0785-1.0985 consolidation range. The pair holds potential to drop to the lower bound of the range in the short term.
——Source: MetaTrader Finam Ltd., Daily Chart
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