The dollar bulls are starting to lose the grip on Wednesday as the risk sentiment shows some signs of improvement. However, the buck remains on the offensive generally as the currency refrains from a deeper retreat ahead of new tariff exchange between the US and China due tomorrow.
The trade war escalation could send the riskier assets lower once again, while the greenback will benefit as a typical safe-haven currency along with the Japanese yen. As such, EURUSD could resume the decline and once again challenge the 20-DMAwhich is the last line of defense ahead of the 1.15 support area. The risk factors for the euro are also the developments around the Italy’s budget and the potentially strong US jobs data for August due this Friday.
In the long term however the pair could regain strength as the prospects of further tightening in the US may weaken should the economy slow down amid trade wars, while the ECB may start to prepare markets for hiking rates after the QE ends this year. As such, a dip below 1.15 could be attractive for long-term buyers who believe in the positive outlook for the euro zone economy.