EUR/USD underpinned by US fiscal impasse and lingering Sino-US tensions
- EUR/USD rises 0.17% despite overbought readings on technical indicators.
- Record bullish bets also make EUR vulnerable to a pullback.
- The downside looks muted at best with investors focused on fiscal deadlock in Washington.
EUR/USD rally looks overdone as per technical indicators, however, a notable pullback could still remain elusive, as a fiscal impasse in Washington is likely to keep the dollar bulls at bay.
The pair is trading at 1.1860 at press time, representing a 0.17% gain on the day. The weekly chart relative strength index is hovering above 70, indicating overbought conditions for the first time in over 2.5 years.
That, coupled with the all-time high bullish bets, makes the shared currency vulnerable to a setback.
However, stalled coronavirus stimulus negotiations in Washington and simmering Sino-US tensions may keep the dollar under pressure and restrict losses in EUR/USD.
Lawmakers from both the House of Representatives and the Senate have largely returned to their home states for August recess, according to a report by Forbes. As such, the much-anticipated stimulus is likely to remain elusive at least until September, when lawmakers will return to work.
Meanwhile, the US and China delayed a review of their Phase 1 trade deal initially scheduled for Saturday and have not announced a new date so far. President Trump issued an executive order on Friday forcing ByteDance, the Chinese company behind TikTok, to sell-off or spin-off its US social media business in 90 days.