- EUR / USD feels the pull of gravity amid the escalating US-China tensions.
- President Trump threatens to block funding for the WHO, while China accuses Trump of witchcraft.
- On the data side, the focus will be on data from the German Zew survey for May.
EUR / USD made its biggest one-day percentage gain in 7.5 weeks on Monday to confirm a bullish break on the daily chart. So far, however, follow-up has been weak.
The currency pair is trading at 1.0908, which represents marginal losses on the day. The pair posted a two-week high at 1.0927 on Monday.
Risk increases the dollar
The sense of risk has soured in Asia with President Trump asking the World Health Organization (WHO) to demonstrate its independence from China in the next 30 days. Trump has also threatened to cut funding if the United Nations agency does not commit to making significant substantial improvements in the next 30 days.
Meanwhile, the editor of the Global Times of China accused Trump of witchcraft for using hydroxychloroquine to treat the coronavirus. As a result, futures on the S&P 500 turned red during trading hours in Asia, placing a safe haven offer below the US dollar. At the time of publication, futures are down more than 0.30%.
Looking ahead, a deeper fall in the EUR / USD could be observed if the prospective indices of the German Zew survey fall short of market expectations. Data dissemination is scheduled for 09:00 GMT. The Zew Eurozone survey, also expected at 9:00 GMT, could influence the pair.
It should be noted that the United States and China have recently agreed on the origin of the coronavirus pandemic and on how China handled the epidemic. In addition, tensions on this front are starting to translate into new trade frictions. Even if the EUR / USD gains altitude on the back of strong potential German data, the downside risk will persist.