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EUR/USD Commentary and Analysis

Friday afternoon's revelation that the Obama administration, at the request of the United Steel Workers Union, was imposing a 35% increase on the importation of Chinese tires, caused concern in the equity markets.  Shortly there after the Chinese vowed they would complain to the WTO about alleged dumping of auto parts and poultry by the US.   Recollection of the harm caused to world trade during the 1930's by the Hawley Smoot Act of 1930, makes markets sensitive to any potential curtailment of trade.

Weaker Asian markets prompted the Euro to trade lower, picking up some down momentum in the NY session, trading down under 1.4520 briefly.  When it became apparent the US equities, were not going to tank, the euro recovered quickly, and rallied above 1.4650.

It remains to be seen if the trade skirmish will remain subdued and diplomatic, or takes a more bellicose turn.  So far President Obama has been willing to aggressively pursue any union cause regardless of the opponent.   Considering the tremendous increase in speculative interest in the currency markets, s pick up in volatility can be expected.  Should this pair retreat to 1.45 , consider the long side on a retreat to that level.  Risk 100 pips from the entry, but exit early if equities turn sharply lower.