EUR/USD Forecast: Challenging uptrend support amid fresh trade tensions

The EUR/USD is leaning lower at the wake of the new week, trading closer to 1.1700 than to 1.1800. The new US tariffs on China are implemented today and tensions mount, boosting the US Dollar and the Japanese Yen. 

Axios reported that the Trump Administration plans a broadside on China, blaming it not only for trade but also for cyber-security issues, economic espionage, intellectual property theft, and more. Chinese officials canceled their trip to Washington for trade talks. 

The gridlock in Brexit talks has hit the Pound hard and also slightly weighed on the Euro. UK PM May convenes her cabinet later in the day to discuss the EU's rejection of her Chequers plan and what to do next.

The German IFO Business Climate is due later but the main event of the day is the testimony by Mario Draghi in the European Parliament. The President of the European Central Bank will lay out his views on the current economic situation, inflation developments, and perhaps touch on trade wars.

The ECB tapers down its bond buys next week. Draghi's colleagues at the ECB have also spoken out lately. Ewald Nowotny wants to accelerate the path to finishing monetary stimulus while Peter Praet and others wish to soothe investors by clarifying that rate hikes will be very gradual.

The primary event of the week is the rate decision by the Federal Reserve. The Fed is projected to raise rates now and signal a move in December. The bigger question is about future steps.

See: Fed Preview: Tight or not so tight? Dollar Domination awaits

EUR/USD Technical Analysis

The EUR/USD is trading alongside an uptrend support line that accompanies it for over a week. The recent drop puts the trendline into play. The pair is trading above the 50 and 200 Simple Moving Averages on the four-hour chart, a bullish sign. The Relative Strength Index is quite balanced.

The 1.1725-1.1735 area capped the pair in September and in August and is a battle line. 1.1650 was a low point last week and provides further support. 1.1605 held the pair up earlier in the month.

The fresh high of 1.1800 that was seen on Friday is also a round number and serves as resistance. A further cap is the mid-June high of 1.1850 and the veteran January high of 1.1915 is next up.