EUR/USD: Trade optimism bodes well for the euro

• EUR/USD trades at 1.1812 at press time versus 1.1785 in early Asia. 
• Trade optimism and risk-on is powering gains in EUR/USD. 
• On the data front, the focus will be on the German IFO – Expectations index.

The buying pressure around the single currency is picking up pace on Tuesday amid the US-China trade optimism and pushing EUR/USD higher in the 1.18 neighborhood. 

Risk-on weighs over USD

Once again, a better mood in the financial markets is acting as a drag on the safe haven US dollar. 

While the futures tied to the S&P 500 are trading at record highs, the major Asian indices like Japan’s Nikkei and South Korea’s Kospi are up at least 1% each. The Chinese stocks, too, are flashing green, but have pulled back from session highs. 

The risk-on could be attributed to trade optimism and positive news on the coronavirus vaccine front. Top US and Chinese officials on Monday agreed to take necessary steps to ensure the success of the US-China phase one trade deal. 

In addition, Financial Times reported that the Trump administration is considering providing "emergency use" approval of the experimental coronavirus vaccine from AstraZeneca and Oxford University before the Presidential Elections, due in November this year. 

The improved risk appetite and the resulting weakness in the dollar has saved the day for EUR/USD bulls. That’s because the pair was looking weak in early Asia, having charted a “Gravestone Doji” candle on Monday. 

The gains, however, could be short-lived, if the final reading for the German second gross domestic product misses preliminary estimates by a big margin. Also, the focus would be on the forward-looking German IFO – Expectations index, due at 08:00 GMT. An above-forecast IFO data will likely invite stronger buying pressure. 

Technical levels