EUR/USD Forecast: Recaptured the uptrend channel and feels merry ahead of Mario Draghi

• EUR/USD is trading at the upper part of the recent range, amid a better mood.
• Italy, France, and trade are in the limelight as Brexit takes a break from impacting the Euro.
• The technical picture has improved, but bears are not too far.

EUR/USD is trading closer to 1.1400 once again, well within the well-known ranges, albeit on higher ground. The world's most popular currency pair is boosted by a better market mood, stemming mostly from trade talks.

China, Italy, France, and also Brexit

According to reports, China is moving forward with buying US soybeans. Soy trade does not carry a significant economic weight, but farmers form a critical part of US President Donald Trump's base. Another step forward is related to the China 2025 program, which the Middle Kingdom may modify or postpone according to the Wall Street Journal. The long-term development program, focusing on robotics and Artificial Intelligence (AI) is considered by some to be a threat to US hegemony. 

Apart from the upbeat global mood, Italy and the European Commission are also making progress, or at least not clashing. Italian PM Giuseppe Conte met EC President Jean-Claude Juncker, and the sides continue talking amid the EU Summit.

The French budget may also come under scrutiny as President Emmanuel Macron pledged to listen to protests. However, Brussels will likely take a softer approach to the continent's second-largest economy, especially as the debt-to-GDP ratio is much lower than that of Italy.

In the UK, PM Theresa May won a confidence vote in her Conservative Party. At the moments, markets are cheering the escape from an imminent collapse of the government. However, the no-confidence vote by 117 members, the lack of a majority in Parliament for the Tories, and the refusal of the EU to renegotiate Brexit may all come to haunt the Pound and eventually hurt the Euro. At the moment, the Euro seems to ignore Brexit developments.

In the US, Wednesday's inflation report for November fully met expectations with Core CPI accelerating at 2.2% YoY. The Fed remains on course to raise rates next week. 

Draghi show

The focus now shifts to the all-important rate decision by the European Central Bank. The Frankfurt-based institution is set to formally end announce the end of bond-buying at the end of this year. The balance sheet is placed to reach 2.6 trillion euros, and the ECB will likely maintain it with its policy of reinvestments. 

The ECB will also publish new growth and inflation forecasts. The recent slowdown and the contraction in both Germany and Italy may prompt a downgrade of forecasts. Most importantly, markets will focus on the prospects for a rate hike. President Mario Draghi and his colleagues pledged to maintain low rates through the summer of 2019. Will they push it back? The euro will follow every word coming out of Draghi's mouth.

EUR/USD Technical Analysis

EUR/USD lost the uptrend support line earlier this week, but the recovery seen late on Wednesday sent it back to the channel. The pair also trades above the 50 and 200 Simple Moving Averages on the four-hour chart. On the other hand, Momentum remains to the downside, and an upside break is yet to materialize. It all depends on Draghi.

1.1405 capped the pair earlier this week and also in late November. 1.1420 was a swing high last week, and 1.1445 is the December high so far. Further above, 1.1475 and 1.1500 loom.

1.1380 was a temporary cap around the turn of the month. 1.1350 served as support at the beginning of the week. 1.1325 provided support last week, and 1.1305 is more significant as a double bottom in the past two weeks.

More: EUR/USD has room to rise ahead of the ECB meeting – Confluence Detector