On Monday, rising US-China trade tensions triggered a massive sell-off in global equities but the greenback failed to take an advantage as a safe-haven currency. That’s because lower odds of striking a trade deal fuels expectations of delivering more aggressive stimulus measures by the Federal Reserve which is a bearish sign for the dollar.
Against this backdrop, EURUSD briefly spiked to the 1.1250 area early on Tuesday but failed to stay above the 100-DMA and has settled around the 1.12 key level. German industrial orders data came in much better than expected but remained in the contraction territory and failed to deliver a meaningful support to the common currency.
In the short-term, EURUSD could be locally affected by the statement from the Fed’s Bullard on the outlook of the US economy. Should he express a less dovish tone than expected, the dollar may rise across the board. In this scenario, the pair may retreat below 1.12, with the initial support comes around 1.1160. As long as the euro remains below the above mentioned moving average, the downside risks persist.