EUR/USD Forecast: Pummeled by Powell and prone to pressure

The EUR/USD is trading in the lower part of the 1.16 handle, losing ground for the second day in a row. The primary driver is the US Dollar which maintains the broad uptrend. The greenback got a boost from Fed Chair Jerome Powell in his testimony on Tuesday. 

Powell was very bullish on the economy. He expressed satisfaction with growth which is set to be higher in Q2 after an OK Q1. The Fed Chair also talked about how the improving job market is reaching different types of people in the US and was very confident about inflation. He continued conveying the message of raising rates gradually.

Powell tip-toed around trade. The prepared statement included a phrase about "uncertainty". However, when responding to questions, Powell said lower tariffs are better than higher ones and that the recent policies trigger the postponement of business decisions. While he was very careful not to enter politics, the expert opinion of the Fed and its Chair is clearly not in favor of Trump's policies.

More: Powell Quick Analysis: bullish on jobs, bullish on inflation, dodging trade, more USD gains?

US President Donald Trump backtracked on his Helsinki press conference comments regarding Russian meddling in the US elections, but the new statement and the old one did not have an impact on markets which are more interested in Trump's policies on trade. 

The European Union signed a free trade agreement with Japan, in a move also seen as a rebuff to American protectionism. The impact is more political than practical: the deal may take years to ratify in Europe's national and regional parliaments. 

The euro-zone will release the final inflation figures for June. The preliminary data showed a divergence between the headline and core inflation. Rising oil prices pushed the topline Consumer Price Index to 2% YoY while underlying Core CPI remains stuck at 1%. The final figures are projected to confirm the initial read.

In the US, Building Permits and Housing Starts for June carry expectations for minor changes in comparison to May. The figures may have a significant impact if they both move in the same direction.

The main event of the day is the same as the one on Tuesday: Powell's testimony. This time, he will appear in front of a House Committee. The opening statement will be identical to Tuesday's, leaving the focus on the lengthy Q&A session. Less caution on the hot topic of trade may rock markets.

EUR/USD Technical Analysis

The pair is now trading below the 50 and 200 Simple Moving Averages on the 4-hour chart. The Relative Strength Index is also leaning lower and Momentum is marginally negative. The EUR/USD is trading within a broad wedge, closer to the lower end. All in all, the bias is bearish. 

Looking down, 1.1610 was a low point on July 13th and serves as a support line. Close by, 1.1590 was a swing low on July 2nd and remains of importance. 1.1540 cushioned the falls in late June and is the last line defending the 2018 low of 1.1508. 

On the upside, 1.1665 was a low point on July 11th. Further above, 1.1695 capped the pair on July 12th and later provided support. 1.1745 was a high point on July 17th. 

More: EUR/USD has limited room to recover, the downside is more appealing – Confluence Detector