EUR/USD Forecast: directionless around 1.1700 mark, Draghi eyed for fresh impetus

The EUR/USD pair continued with its good two-way price action on Tuesday and finally managed to end the day with only modest losses. A sharp decline in the German ZEW Economic Sentiment, dropping to its lowest reading since August 2012, was seen as one of the key factors weighing on the shared currency. This coupled with a follow-through US Dollar uptick exerted some additional downward pressure and dragged the pair to an intraday low level of 1.1690. The downtick was quickly bought into, with a modest USD retracement during the North-American session helping the pair to rebound around 60-pips from session lows. 

The pair, however, lacked any strong follow-through and gravitated back towards the 1.1700 handle, hit by escalating US-China trade tensions. The Trump administration revived fears of a full-blown trade war on Tuesday and threatened to slap 10% tariffs on an extra $200 billion worth of Chinese imports, resulting into a fresh wave of global risk aversion trade across global financial markets. 

Moving ahead, investors on Wednesday will focus on the ECB President Mario Draghi's speech in Frankfurt. Draghi is due to deliver opening remarks at the ECB Statistics Conference and any comments on the central bank's monetary policy outlook might infuse a bout of volatility across EUR crosses.

From a technical perspective, the pair now seems to be oscillating within an upward sloping channel on the 4-hourly chart, with immediate support near the 1.1700 handle. A convincing break below the trend-channel support, leading to a subsequent fall below the 1.1690-85 region, might turn the pair vulnerable to slide back towards the 1.1630 horizontal support en-route the 1.1600 handle. 

Alternatively, a sustained move back above mid-1.1700s has the potential to lift the pair beyond Monday's three-week high level of 1.1791 towards challenging the trend-channel resistance, currently near the 1.1815 zone. A follow-through buying beyond the mentioned barriers now seems to pave the way for an extension of the pair's ongoing recovery move from YTD lows.