The EURUSD pair shot higher during the course of trading yesterday but for those who have been following our forecasts, this should not come as much of a surprise as we had said that a bounce was likely to be possible and it was only a matter of time as the bears were struggling to make much of a headway in their move lower and hence it required the prices to move higher to attract more sellers.
EURUSD Moves Back Above 1.22
Yesterday, the data from the US was on predicted lines and in some cases, it was in fact better. Then came along the next testimony of the new Fed Chief Powell and he kept the door open for a 4th rate hike during the course of the year. This should have led to the dollar moving higher in strength but unfortunately, that did not happen as a more important news came along. The Trump administration decided to implement tariffs on import of steel and aluminium and this has led to fears of a trade war.
A lot of steel and alumunium used in the US is imported and a large part of this is used by the car industry. By the imposition of this tariff, the administration is trying to bring in more equality in the trade but this increases the possibility of car prices moving higher. Also, China has already declared it as a wrong and flagrant move and we could see them retaliate quite soon. This has led to uncertainty and this has in turn led to the dollar becoming weaker which has since helped the EURUSD pair to move back into the highs of the 1.22 region.
The pair is likely to face a lot of resistance in this region and hence we expect some consolidation and a slow day during the course of trading today, especially due to the lack of any major economic data or news from either the US or the Eurozone.