02.07.202016:05 Forex Analysis & Reviews: Outlook for EUR/USD. US to impose sanctions against China. EUR needs support as people who lost jobs during pandemic

The White House is distancing from China. In fact, actions of the US authorities may lead to break the US-China trade agreement that was reached at the end of the previous year. The House of Representatives of the US Congress approved a bill that describes a number of sanctions against China and its officials involved in the development of the national security law in Hong Kong. The bill was sent to the Senate, and later, it will be passed to President Donald Trump for signature. Notably, the document mainly focuses on banks that conduct business with the Chinese officials, which are involved in the development of Hong Kong's law. The US decision to exclude Hong Kong from the export restrictions and stop all deliveries of defense sector products, including dual-use products, caused indignation among the Chinese officials. It took a lot of time to make such a decision. As a result, it soured relations between two countries.

On June 30 ^th, President Xi Jinping signed a presidential order to promulgate the law. The Chinese Foreign Ministry has repeatedly warned that it is ready to respond to the United States, which has long interfered in Hong Kong's internal politics.

Amid the news, the US dollar went on losing its positions against risk assets. The US dollar was also influenced by the fact that the key interest rate could be changed only in 2023. The decision was announced during the Fed's meeting in June. At the moment, the benchmark rate is almost at the zero level. The key aim is to stabilize the government debt market and other credit markets. Besides, almost all members of the meeting voted to keep the current stimulus measures unchanged.

At the same time, in Italy, unemployment showed a rise in May. Notably, the indicator advanced when the economy was reopening. People who lost their jobs because of the quarantine imposed to contain the virus spread still have serious problems. According to the data provided by Istat, in May, the unemployment rate reached 7.8% compared to 6.6% in April. Figures for the previous month were upwardly revised. The number of unemployed people jumped by 370,000 whereas the number of employed people dropped by 84,000.

The eurozone labor market data disappointed market participants. Despite the fact that a drop in jobs was smaller than during the quarantine, the number of unemployed advanced thus leading to a higher unemployment rate. Thus, the eurozone unemployment level increased to 7.4% in May from 7.3% in April. Economists had expected a rise to 7.7%.

The eurozone producer price index data was also rather weak. In May, the indicator declined by 0.6% compared to April due to low activity. Economists had forecast a drop of 0.5%. Excluding prices of energy, the eurozone producer prices decreased by 0.3% and by 0.6% compared to the previous year.

Let's take a look at the euro/dollar pair. Bulls are still prevailing. The key aim is to break this week's high of 1.1290. They failed to do this early today. If the price breaks the mentioned level, it may rise to 1.1350 and 1.1390. However, if the quote breaks the support level of 1.1240, it may resume the downtrend to hit this week's low of 1.1190.