EUR/USD Forecast: Riding uptrend support and ignoring the tariffs ahead of the NFP

The EUR/USD is trading above 1.1700, slightly up on the day and in relative calm. US tariffs on Chinese goods worth $34 billion of goods came into effect at 4:00 GMT, midnight in Washington, as expected. China initially responded with a pledge to retaliate but without any specific details, also pledging open trade. Later on, they clarified that counter-tariffs are being implemented.

Markets seem to have adopted a "buy the rumor, sell the fact" response. So far, everything that happened was expected. This relatively calm mood is supportive of the Euro against the US Dollar. However, this can change later on, especially if the US decides to retaliate with counter-tariffs to China's counter-tariffs. Tweets from US President Donald Trump early in the American morning can also trigger a further reaction.

The FOMC Meeting Minutes released on Thursday revealed growing concern among the members regarding trade. The document also helped calm markets as a worried Federal Reserve will not hurry to raise interest rates too fast. 

German Chancellor Angela Merkel opened the door to reducing EU tariffs on cars, a move that is officially meant for all countries but is primarily aimed at preventing the US from slapping German carmakers with prohibitive tariffs. 

In the euro-zone, German Industrial Production increased by 2.6% in May, better than had been expected, yet with a downward revision. French trade balance disappointed with a wide deficit of €6 billion. Neither figure had a significant impact, as tension mounts towards a more important event later in the day.

The US publishes its monthly jobs report at 12:30 GMT, an event that always moves the markets. Expectations stand at a gain of 195,000 jobs, and more importantly, an acceleration in wage growth from 2.7% to 2.8%. 

See Nonfarm Payroll preview: tariffs could overshadow employment data

EUR/USD Technical Analysis

The pair is trading along an uptrend support line (thick black line on the chart). In addition, the Relative Strength Index on the four-hour chart points to further gains: above 50 and below overbought territory, which stands at 70 points. Momentum remains positive as well.

On the upside, we find the July 5th and June 26th high of 1.1720 as an immediate level. Further up, 1.1800 is a round level. Further above, 1.1850 was the swing high of June 14th. 

Looking down, some support is found at 1.1690 which held the pair down on July 2nd. It is followed by 1.1630 which was a low point on July 4th. Lower, 1.1590 was a swing low on July 2nd. 

More: EUR/USD path of least resistance is up ahead of the NFP – Confluence Detector