15.05.201901:27 Forex Analysis & Reviews: EUR/USD: the euro traps the bulls

The disruption of the trade deal between Washington and Beijing gave rise to a new period of exchange of blows.

On May 10, the United States raised tariffs for $200 billion worth of goods from China, to which Beijing responded with an introduction of mirror duties for $60 billion. In addition, the latter may impose restrictions on imports of American agricultural products. The United States, in turn, is ready to expand the list of Chinese goods subject to increased duty.

Such a development does not bode well for the eurozone, given Germany's dependence on exports, which accounts for almost 47% of the country's economy.

However, despite what is happening, the EUR/USD pair shows a restrained dynamics.

Moreover, on the bad news, the pair is trying to recover, acting, it seems, on the principle of "the worse – the better." On the one hand, the escalation of the trade conflict between the United States and China is a reason to wait for the Fed to soften, on the other hand, there is reason to believe that the European front of the "war" in Washington is likely to be forgotten for a while.

Analysts from the National Australia Bank (NAB) explain this behavior of the single European currency by reducing short positions in the euro against the currencies of developing countries against the background of a weaker risk appetite.

The financial institution admits that in the near future it will continue to support the euro, and a breakthrough above the 1.1260 mark will provide a fresh impetus for the growth of the EUR/USD pair.

At the same time, experts doubt that the euro will find the strength to sustain a breakthrough above the level of 1.1325, and note that the continuation of the trade war between the two largest economies in the world calls into question the prospects for the recovery of EUR/USD.

Moreover, as long as the pair remains below the level of 1.1250, it's hardly worth talking about breaking the medium-term "bearish" trend.