EUR/USD Faces Critical Support After Losing Ground

EUR/USD is trading in the mid-1.1400s, down from the highs but above the opening levels of the week. The world’s most popular currency pair gained ground on the optimistic atmosphere on Monday. Echoes from Powell’s dovish speech boosted stocks and triggered a sell-off of the safe-haven US Dollar.

On Tuesday, the optimism is fading, and another positive development tries to take its place, albeit with little success. Trade talks between the US and China are moving forward. China sent in President Xi’s top economic adviser Liu He to the negotiations. US Commerce Secretary Wilbur Ross also expressed optimism.

On the other hand, we have heard these hopes beforehand. Several positive tweets by President Trump failed to materialize into something substantial while the data shows a slowdown in China and in other places. Markets are taking it with a big grain of salt, and the USD is recovering its losses.

In the old continent, things are not looking that great. Monday’s data was mixed: the Sentix gauge of business sentiment met expectations Germany’s retail sales beat expectations and compensated for a disappointing drop in factory orders.

Tuesday’s news from Germany is already decidedly disappointing. Industrial output from the continent’s locomotive plunged by 1.9% in November, coming on top of a downward revision. There are growing fears that the contraction that the economy endured in Q3 was not a one-off and concerns of an outright recession are surfacing.

The European Central Bank remained cautiously optimistic about euro-zone growth, and this cautious optimism is also reflected in EUR/USD. However, confidence is hard to justify with every such figure.

The economic calendar is light today with the US JOLTs report being the only notable number. Trump will deliver a speech early on Wednesday, at 2:00 GMT. He will address the government shutdown, and his televised speech will be watched by many. While some US figures have not been published, the impact on the economy and markets is minuscule at the moment.

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