FX.co ★ EURUSD and G20: the United States and China are unlikely to find understanding in trade relations that will hit the US dollar

The euro remained to trade in a side channel against the US dollar and a number of other currencies before the important weekend, which will host the G20 summit. The main point of the summit will be a meeting of the leaders of the United States and China, who can sign an agreement allowing the two world powers to resume trade relations without additional duties and restrictions.

However, a number of analysts expect the US dollar to decline against the euro in the short term. This scenario is directly related to the "early transaction" on trade between Washington and Beijing, to which we can add a 99% probability of lowering the key interest rate of the US Federal Reserve.

It is already known that before the meeting of the leaders of the two countries, no preconditions in the negotiations of Trump and Xi have not yet been indicated.

However, it is worth recalling that in the middle of the week, the Chinese authorities said that Xi will focus on Huawei and on the removal of trade duties, which the US introduced last month on a number of goods from China.

As for the fundamental data, the report on consumer prices in Germany allowed the European currency to stay above the level of 1.1350.

According to the data, the rise in prices in the service sector helped to maintain the overall consumer price index.

The report of the Federal Bureau of Statistics Destatis indicates that the preliminary consumer price index (CPI) in June 2019 increased by 0.3% compared to the previous month and by 1.6% compared to the same period of the previous year. Economists had expected an increase of 0.1% over the previous month and 1.4% over the same period of the previous year. As noted above, prices in the service sector increased by 2.0% in June compared to the same period of the previous year.

The index harmonized by EU standards in June increased only by 0.1% compared to May and by 1.3% compared to June 2018, which fully coincided with economists' forecasts.

The data on the US economy also did not make serious changes in the technical picture of the EURUSD pair. According to the report, the number of initial applications for unemployment benefits for the week from June 16 to 22 increased by 10,000 and amounted to 227,000. Economists had expected the number of applications to be 219,000.

The US GDP growth rate for the 1st quarter of this year remained quite high. According to the third final estimate, the US economy showed growth of 3.1% per annum. However, the current growth rate is unlikely to be maintained in the 2nd quarter, where there is a serious decline in consumer spending. Economists had expected Q1 growth rates to remain unchanged.

Data from the National Association of Realtors did not help the US dollar to resume growth. The report shows that the index of signed contracts for the sale of housing in May 2019 increased by 1.1% and amounted to 105.4 points, which is directly related to a slight decrease in mortgage rates for that period. However, compared to the same period of the previous year, the index fell by 0.7%. Economists had expected the index to show a 1.0% increase in May.

The report on the decline in the activity of the Federal Reserve Kansas city was not surprising, as production in the US slows down in many regions due to trade problems.

According to the Federal Reserve Bank of Kansas City, the composite manufacturing index was 0 points in June versus 4 points in May. As noted above, the slowdown in production activity was due to a decline in the production of durable goods, the demand for which fell sharply.

As for the technical picture of the EURUSD pair, it remained unchanged. The bulls are clearly pushing, and the further short-term downward correction will be the envy of the breakthrough of a large support level of 1.1350. Only then can we expect the demolition of a number of stop orders and a more rapid decline in the trading instrument in the area of 1.1317 and 1.1280. However, it should be understood that if the level of 1.1350 will continue to hold, by all means, the emerging technical model can lead to a new, larger growth of risky assets, and the breakthrough of the resistance of 1.1410 will be a signal for the opening of long positions in the expectation of updating the highs of 1.1490 and 1.1570.