EUR/USD struggles despite US-China trade truce, focus on German inflation

EUR/USD is trading on the defensive at press time despite reports of US-China trade truce. As of writing, the currency pair is trading at 1.1360, representing 0.10 percent losses on the day. 

South China Morning Post reported in Asia that the US and China have tentatively agreed to another truce ahead of the weekend's G-20 meeting. The news lifted the Asian stocks and pushed the JPY lower across the board, but did little to boost EUR/USD. 

Greenback's resilience could be associated with the three basis point rise in the US 10-year yield. It is worth noting that easing of trade tensions between the US and China, if any, would also ease pressure on the US Federal Reserve to cut rates. Therefore, the talk of temporary US-China trade truce could continue to bode well for the US Dollar in the European session. 

That said, EUR/USD's technical outlook is still bullish with the pair holding above the inverse head-and-shoulders neckline support (former resistance). Further, the pair continues to trade above the 200-day moving average at 1.1352, having defended the key support in the previous two days. 

As a result, a big move to the higher side, possibly to Tuesday's high of 1.1412, could be seen if the preliminary German consumer price index for June blows past expectations. The data due at 12:00 GMT is expected to show the cost of living in Eurozone's biggest economy rose 0.1 percent month-on-month in June, having risen 0.2 percent in the preceding month. 

Eurozone's key long-term market inflation gauge – the five-year, five-year breakeven forward rate – is already up 10 basis points since Draghi's speech on Tuesday. The gauge would rise further if the German inflation data prints above estimate, weakening the case for an early European Central Bank rate cut and pushing the EUR higher across the board. 

The pair, however, will likely find acceptance below the 200-day MA if the German data misses expectations by a big margin. Post-German data, the focus would shift to the third and final version of the US first-quarter gross domestic product, scheduled for release at 12:30 GMT. 

Pivot levels