EUR/USD Forecast: Perfect wedge implies an explosive move ahead

• The EUR/USD is sticking to its range, not going anywhere fast.
• The narrowing wedge will force the pair to take a decision quite soon.
• Tension is mounting towards US GDP and the ECB's decision.

The EUR/USD trading in a relatively narrow range just under 1.1700, consolidating its losses from yesterday. The US Dollar advanced on Monday amid leaks from the White House. US President Donald Trump and his aides told Fox News that Q2 growth is expected to be close to 5% annualized. Market expectations which stood at 4.2% are now at 4.8%. 

A more robust growth rate implies a faster pace of rate rises by the Federal Reserve and a stronger US Dollar. The first release of Q2 GDP is released on Friday at 12:30. The initial publication always draws more attention than the next ones and following the leak, anticipation is even greater.

The second significant event of the week is the rate decision by the European Central Bank. ECB President Mario Draghi and his colleagues are not expected to change any of their policy measures at this point but may respond to the diverging inflation measures, trade fears, and other recent developments. 

See: ECB Preview: All quiet on the monetary policy front until 2019

In the euro-zone, Markit's preliminary Purchasing Managers' Indices came out above expectations overall. Frech Manufacturing PMI beat with 53.1 while Services slightly missed with 55.3 More importantly, Germany's Manufacturing PMI is on the rise after several months of declines, standing at 57.3. Also here, the Services PMI did not impress with 54.4.

The PMI's are forward-looking surveys that provide guidance for the future. The robust manufacturing data implies that French and German manufacturers do not fear tariffs, at least for now. 

Later today, Markit publishes its preliminary PMI data for the US. No big changes are expected there.

EUR/USD Technical Analysis

The EUR/USD is trading in a narrowing triangle or wedge. Downtrend resistance has its roots back in mid-June and has since touched the price twice. Uptrend support dates back to late June and also touched the price two additional times. The pair is closer to uptrend resistance but basically in the middle of the range.

Where will it go to? 

The Relative Strength Index is stable around 50. However, Momentum has picked up to the upside and the pair trades above the 50 and 200 Simple Moving Averages on the four-hour chart, both bullish signs. 

Looking up, 1.1750 capped the pair on Monday and is the initial hurdle. 1.1795 was a high point in mid-July and 1.1850 was a swing high back on June 14th. All three lines form the downtrend resistance line.

On the downside, we find 1.1675 was an immediate line of support after holding the pair down last week. 1.1575 was a swing low last week and forms part of uptrend support. 1.1508 is 2018 low and where the uptrend support line begins.

More: Trade War from the Trenches: the dogs bark but the caravan moves on (for now)