- EUR/USD has turned south amid risk aversion on Tuesday.
- 1.2200 aligns as key technical support for the pair.
- Markets keep a close eye on geopolitical developments.
EUR/USD has reversed its direction following Monday's rally and declined toward 1.0200 during the European trading hours on Tuesday. The pair could extend its slide if 1.0200 support fails and markets participants will keep a close eye on geopolitical development.
Markets have turned risk-averse ad safe haven flows started to dominate the action early Tuesday on reports suggesting that US House of Representatives Speaker Nancy Pelosi was planning to visit Taiwan. According to the latest headlines, Pelosi's delegation is expected to arrive in Taiwan at 1420 GMT.
In response, “There will be serious consequences if she insists on making the visit," Chinese foreign ministry spokesperson Zhao Lijian said. Chinese news outlets also reported that Taiwan would face "disastrous consequences" and that the US would pay the price for undermining China's interests.
Reflecting the negative impact of these developments on market mood, US stock index futures are down between 0.4% and 0.7%.
In case investors continue to seek refuge, the dollar should be able to continue to outperform its rivals. The US economic docket will feature JOLTS Job Openings data for June but the risk perception is likely to remain the primary market driver.
On the other hand, a positive shift in sentiment with a de-escalation of China-US tensions could help EUR/USD regather its bullish momentum.
EUR/USD Technical Analysis
EUR/USD was last seen trading near 1.0230, where the Fibonacci 38.2% retracement level of the latest downtrend is located. If buyers fail to reclaim that level, 1.0200 (psychological level, 50-period SMA on the four-hour chart) aligns as key support ahead of 1.0150 (Fibonacci 23.6% retracement, 100-period SMA).
On the upside, 1.0300 (psychological level, Fibonacci 50% retracement, 200-period SMA) forms significant resistance ahead of 1.0370 (Fibonacci 61.8% retracement).
In the meantime, the Relative Strength Index (RSI) indicator has retreated toward 50 with the latest decline, suggesting that bulls remain hesitant to bet on further euro strength.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.