EUR/USD Forecast: Pressured by downward resistance as markets await tariffs, NFP

The EUR/USD is trading higher, rising within the 1.1600 handle. The US Dollar is slightly weaker on Friday. The deadline for public comments on potential new US tariffs on China has expired, and markets await an announcement from the Administration. The silence from Washington marginally improves the mood.

Last week, President Donald Trump said he wants these new duties to come into force as soon as possible. So far, the US slapped levies on $50 billion worth of Chinese goods, and China retaliated in kind. In this round, the US intends to hit China with tariffs on no less than $200 billion worth of products, a severe escalation that could disrupt the global economy. 

On the other hand, various US business groups have lobbied the Administration to refrain from imposing immediate tariffs or at least providing some relief their industries. Markets remain tense.

More: Trade wars: $200 billion is serious, 3 scenarios and currency reactions for the upcoming escalation

The wait for tariffs competes for attention with the US Non-Farm Payrolls. After reporting a slow increase of 157,000 positions in July, a healthier increase of 191,000 is on the cards for August, back to normal levels. Wages are projected to advance by 0.2% MoM, slower than 0.3% in July. Year over year, a repeat of the 2.7% rise is forecast.

Early indicators towards the NFP were mixed. The ADP NFP missed with only 163,000 private sector jobs gained in August while the employment component of the ISM Non-Manufacturing PMI advanced. 

See: 

• Nonfarm Payrolls preview: too much trouble somewhere else
• See how to trade the event with the EUR/USD

German Industrial Production disappointed with a drop of 1.1%, worse than expected and the second consecutive month of declines. Factory orders fell as well, as reported on Thursday. Italy reiterated its pledge to respect euro-zone budgetary rules when presenting its new fiscal plans. The spread between Italian and benchmark German bonds is watched.

All in all, volatility is set to increase with both the potential announcement on tariffs and the Non-Farm Payrolls. Headlines regarding Brexit have influenced the EUR/USD earlier this week, and further developments on that front cannot be ruled out either.

EUR/USD Technical Analysis

The EUR/USD continues trading under the downtrend resistance line that successfully rejected attempts to move higher. The pair is also attempting to climb above the 50 Simple Moving Average on the four-hour chart. Momentum and the Relative Strength Index are marginally positive.

1.1660 capped the pair earlier this week and is immediate resistance. 1.1690 held the EUR/USD down late last week. 1.1735 was a high point last week, and it is followed by the quadruple top of 1.1750 seen in July.

1.1610 was a low point on Thursday, and it is accompanied by the critical double-bottom at 1.1530. Further down, 1.1495 was a swing low late in August, and 1.1445 capped the pair beforehand. 

More: EUR/USD narrow range implies an explosive move on NFP day – Confluence Detector