EUR/USD Forecast: Trump, EM concerns and the downtrend channel limit any gains

The EUR/USD is attempting to recover on some ECB hawkishness.
Concerns about US tariffs, EM, and Italy weigh.
The technical graph shows the pair is trading in a downtrend channel.

Yohay Elam FXStreet

The EUR/USD is trading just below 1.1700, marginally higher on the day. ECB member Ewald Nowotny said that Italy's issues would not stop his institution from raising rates. The shrugging off of Italian woes contrasts the tones from EU Commissioner Oettinger which warned Italy about budget payments.

Also, credit rating agency Fitch is due to provide an update on Italy's rating after European markets close. A downgrade or a warning is possible. Italy is considering breaching EU budgetary rules.

Concern also grows about the US intentions to impose tariffs on $200 billion worth of Chinese goods. US President Donald Trump said late on Thursday that he wants these duties to be imposed "as soon as possible," bringing the issue to the forefront.

Another source of worry is the plunge in some currencies of Emerging Markets. The Argentinian Peso took a dive of 20% against the US Dollar at some point on Thursday. The Indonesian Rupiah fell to a 20-year low, while the Turkish Lira remains under pressure.

The euro-zone will publish preliminary inflation figures for August at 9:00 GMT. July saw prices rising by 2.1% on the headline and 1.1% on the core. The same levels are projected now.

See how to trade the event with the EUR/USD

End of month flows and a long weekend in the US imply choppy trading towards the end of the day. Headlines from Trump and news related to Emerging Markets may have their say.

EUR/USD Technical Analysis

The EUR/USD is trading in a downtrend channel in the past few days and is closer to the upper end at the time of writing. The Relative Strength Index is balanced, and Momentum is lacking.

Support is found at 1.1640, the low point on Thursday. It is firmly backed up by the Simple Moving Average on the four-hour chart. Further down, 1.1595 support the pair early in the week. Lower, we find 1.1530 that served as support last week.

1.1690 is the high point of the day and a weak line of support. 1.1735 was the high point of the week, and it is closely followed by 1.1750, a quadruple top from July. Further up, 1.1795 and 1.1850 are worth mentioning.

More: EUR/USD recovery may run into robust resistance – Confluence Detector

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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