EUR/USD: Stuck in a bearish channel amid EU-US trade war talk

EUR/USD has regained some poise in the last 12 hours or so but is still trapped in a bearish channel amid the increasing fears of the EU-US trade war. 

The single currency picked up a bid at lows near 1.11 during the US trading hours on Tuesday and rose to a high of 1.1135. The bounce, however, ran out of steam in Asia, leaving the pair sidelined near the 50-hour average support at 1.1130. 

EU, US bracing up for a trade war?

European Union’s (EU) new trade chief Phil Hogan is due to meet US Trade Representative Robert Lighthizer and other American officials during a Jan. 14-16, according to Bloomberg. 

During the visit, Hogan will try to settle the dispute over France’s new digital services tax, European support for Boeing’s chief rival, Airbus and other differences. Experts, however, believe it won't be smooth sailing for Hogan, as both the administration and Congress are frustrated due to the EU’s refusal to negotiate with the US on agriculture, according to Politico. 

Hosuk Lee-Makiyama, director of the European Centre of International Political Economy in Brussels, thinks there will be a lot of fireworks before any underlying progress is made in resolving US-EU policy differences over trade. 

As a result, the euro is unlikely to score big gains this week. The common currency, however, may find some love if the Eurozone Industrial Production data, due at 10:00 GMT, blows past expectations. 

Trapped in a falling channel

The pair is stuck in a falling channel represented by trendlines connecting Dec 31 and Jan. 7 highs and Jan. 3 and Jan. 9 lows. 

A convincing breakout would open the doors for a re-test of recent highs near 1.1240.

Technical levels