EUR/USD Forecast: Set-up supports additional gains, Powell’s testimony in focus

The US Dollar weakened further at the start of a new trading week, helping the EUR/USD pair to build on last week's goodish rebound from two-week lows. The greenback did get a minor lift following the release of US economic data - monthly retail sales and Empire State manufacturing index, but the uptick turned out to be rather short-lived and did little to hinder the ongoing positive momentum.

The pair ended the day just above the 1.1700 handle and was now seen making a fresh attempt to build on its strength beyond 50-day SMA. Today's key focus would be on the Fed Chair Jerome Powell's testimony on the Semiannual Monetary Policy Report before the Senate Banking Committee. Investors will be looking for fresh clues over the Fed’s view on monetary policy amid intensifying global trade and would eventually influence the USD price dynamics.

Ahead of the key event, the US economic docket features the release of June industrial production and capacity utilization data, forecasted to come in at 0.5% and 78.3% respectively, and will be looked upon to grab some short-term trading opportunities.

From a technical perspective, the formation of a short-term ascending trend-channel on the daily chart and a move back above 50-day SMA supports prospects for an extension of the pair's steady climb. With short-term technical indicators gradually moving into bullish territory, a sustained move beyond the 1.1745-50 immediate supply zone is likely to get extended towards the 1.1800 handle en-route the ascending trend-channel resistance, currently near the 1.1820-25 region.

On the flip side, the 1.1700 round figure mark now seems to act as an immediate support and is followed by 1.1670 horizontal level. Any subsequent weakness below the mentioned support seems more likely to be limited and should find support near the ascending trend-channel, currently near the 1.1630 region. A convincing breakthrough the trend-channel support would confirm a fresh bearish breakdown and turn the pair vulnerable to aim back towards retesting YTD lows, around the 1.1510 area.

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