EURUSD Edges Up As the US Stares At A Potential Trade Faceoff With China

Summary:
• The EURUSD currency pair has risen marginally on a day when the US House of Representatives is set to vote on a bill that could ban TikTok.

EURUSD has made some gains in late morning European trading session, rising by 0.11% to trade at 1.0939 at press time.  The currency pair is supported by a positive German CPI reading released on Tuesday, which met expectation. The Eurozone’s largest economy struggled in the last year, contributing significantly to the euro’s struggles against the dollar at the beginning of the year.

However, the euro faces headwinds after the Eurozone’s industrial activity contracted more than expected in January. The economic zone’s Industrial Production fell by -3.2% month-on-month, exceeding the forecast figure of -1.8%.

Meanwhile, EURUSD lacks high-impact data for the rest of the trading day on Wednesday, which could favour the bulls. The market seeks to have absorbed the US inflation data and will shift focus to jobs data and core retail sales data set for release on Thursday. There is generally a greater inclination towards a June rate cut by the Fed, while the ECB’s cuts still have a degree of uncertainty regarding their timing. This will likely tilt the scales in favour of the greenback in the intervening period.

US-China tiff over TikTok

Elsewhere, a potential trade war is shaping up between the United States and China. The world’s two largest economies are staring at a potential showdown over the former’s move to prepare legislation that could ban TikTok in the United States. The bill is currently in the US House of Representatives, with legislators set to vote on it on Wednesday. It seeks to have TikTok cut ties with China, based on alleged ties with China’s Communist Party. China denies the allegations and has threatened retaliatory action against US companies. This could impact the dollar’s fundamentals in the coming days.

Technical analysis

The RSI on the 30-minute EURUSD chart signals control by the buyers, with the pivot at 1.0915. The upside will prevail as long as the pair remains above that mark, and the first resistance will likely come at 1.0955. Extended control by the buyers will break the resistance and could push the pair to 1.0970. Alternatively, the market could favour the sellers if price action breaks below 1.0915. That could break the 1.0900 support and potentially test 1.0885 in extension.