EUR/USD: Market indecisive ahead of G-20
- EUR/USD's back-to-back doji candles signal indecision in the market.
- Breakdown of US-China trade talks at G-20 could hurt the US Dollar.
The EUR/USD market is lacking a clear directional bias ahead of the crucial US-China trade talks at the G-20 meeting, which could influence markets' expectations for an interest rate cut by the US Federal Reserve (Fed).
The currency pair charted a Doji candle for a second day on Thursday – a sign of indecision in the market place. The candlestick pattern has taken the shine off the inverse head-and-shoulders breakout and the pair's convincing break above the 200-day moving average seen last Friday.
The weak follow-through could be associated with the uncertainty surrounding the Trump-Xi meeting, scheduled to happen on the sidelines of G-20 meeting on Satursday.
On Thusday, South China Morning Post reported about a tentative truce between the US and China. The optimism, however, was short-lived with President Trump's adviser Larry Kudlow stating that there were no set preconditions for the meeting and the US could still go ahead with additional tariffs on Chinese products.
As a result, markets have turned cautious, as indicated by the moderate losses in the Asian equities. Therefore, the EUR/USD pair will likely continue trading in a sideways manner in Europe. The pair may seem some action in the American session following the release of the US personal spending, personal income and the core PCE (Fed's preferred gauge for inflation) data.
That said, the direction of the next big move largely depends on the outcome of Saturday's Trump-Xi meeting.
The Fed rate cut odds will likely drop, leading to a broad-based USD strength next week if Saturday's trade talks between China's Xi and President Trump end with at least a temporary truce. The US dollar, however, will likely take a beating if the trade talks break down, leading to further economic uncertainty and putting more pressure on the Fed to cut rates.
Pivot points