It seems that investors have finally begun to pay attention to the ongoing conflicts between the two largest economies in the world. Although stock markets continue to be optimistic, a safe dollar has already begun to strengthen its position amid growing tensions between the United States and China.

The parties everywhere find reasons for disagreement - from politics (the current situation in Hong Kong) to technologies (Huawei). At the same time, they reassure investors that they continue to comply with the terms of the recently concluded trade agreement, however, this may soon change.

The chief economic adviser to the US president, Larry Kudlow, said on Tuesday that Donald Trump is aggravated about China because of the virus and other issues that the deal is now less important to him.

After another unsuccessful attempt to gain a foothold above the psychological mark of 1.1000 on Monday, the EUR / USD sentiment again became bearish. The main factor in the pressure on the pair was the growth of the dollar.

However, as the commonplace says, when there are too many bears on the market, you need to start looking for purchasing opportunities.

Support for the euro is provided by the ongoing lifting of restrictions in the Eurozone, as well as the emerging progress in the development of a vaccine against coronavirus. Novavax began testing the vaccine in humans, while Moderna presented its first positive results last week. Merck has also joined the race and plans to conduct clinical trials this year.

Obviously, the COVID-19 pandemic dealt a crushing blow to the European economy, which is already weakened by the trade war of Washington and Beijing.

According to the OECD estimates, in the first quarter, the aggregate GDP of members of the organization decreased by 1.8% quarterly, noting the weakest dynamics since early 2009. According to experts, among the G7 countries, France and Italy looked the worst, and the United States and Japan were the best.

Since 1980, the share of the European economy in global GDP has been gradually declining, and when a pandemic hit the currency block, it will even begin to send SOS signals.

If the US authorities did not spare money to save the national economy, then disagreements within the European Union over the fiscal stimulus, as well as the decision of the German Constitutional Court to ban further participation of the Bundesbank in the European QE would add fuel to the fire on EUR / USD sales.

Since the EU could not come to a consensus, all the hopes for stabilizing the region's debt market began to rest with the ECB. According to the forecasts of the financial institute, the eurozone public debt may increase from the current 86% to more than 100%. If the regulator stops buying bonds, the flight of capital will increase the risks of collapse of the currency block. Is it any wonder then that the "pain index" calculated by Citigroup fell for the euro to the lowest level since December 2018, which indicates the prevalence of bearish sentiment among traders.

Only the rapid rally of the US stock market, inspired by the imminent opening of the US economy, extended a helping hand to the euro and saved it from an imminent fall into the abyss.

The approval of the Franco-German plan to save the European economy by € 500 billion, as well as the willingness of the ECB to expand the quantitative easing program, despite the decision of the judges from Karlsruhe, can trigger a wave of profit-taking on short positions on EUR / USD. In the absence of a new round of the trade war between Washington and Beijing, and the rapid recovery of the American, Chinese, and world economies as well as the related continuation of the rally of US stock indexes, the euro may rush to the upper boundary of the medium-term trading range of $ 1.0650–1.1150.