On Tuesday, Trump disappointed investors, threatening China with substantial tariffs if the two sides fail to strike a trade deal. The US President said the trade deal with China is close but didn’t deliver any details on the possible agreement. Such rhetoric fueled risk aversion on Wednesday, with dollar demand seems to be picking up ahead of the European session.
EUR/USD is trading at the 1.10 psychological support, which can be broken in the short term on a combination of USD demand and the prevailing risk aversion in the global financial markets. The bearish pressure will increase if the US CPI data surprise to the upside and Powell’s tone in today’s speech comes as less dovish than expected. Also, the Eurozone industrial production data could affect the pair in the near term.
Once below 1.10, EUR/USD could reach 1.0990 and then target the 1.0970 area. But should the common currency see a positive scenario, the 1.10 handle will serve as a decent support. The pair could be rejected from this level and proceed to a recovery if the greenback comes under the selling pressure. However, this scenario looks less likely, with downside risks still prevailing for the euro.