USD finds a bid as focus shifts to the trade war

OANDA:EURUSD   Euro / U.S. Dollar
The greenback has recovered partially on Tuesday after a dip to a four-week low against the euro . The EURUSD pair was rejected from the 1.1733 area and retreated to 1.1660 on Wednesday amid profit-taking following an aggressive USD sell-off since the start of last week.

The dollar demand seems to be reemerging, partly due to the abating risk-on sentiment as investor focus shifts from US-Mexico agreement to the US-China trade war. Now, after recent talks failed to bring a major breakthrough, the trade conflict between the two countries could escalate as September 5 is the deadline for public comment on Trump's increased tariffs on $200 billion of Chinese goods.

Therefore, the risk aversion could resume in coming days as investors will likely prefer to focus on safe-havens ahead of the decision on new tariffs. As such, the greenback could win in this scenario and recoup its recent losses. EURUSD may challenge the 1.16 threshold first and target the 20-DMA at 1.1530 afterwards.
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