EUR/USD sliding in the downtrend channel, but not collapsing

• The EUR/USD has been hit US Dollar strength, but weathers the storm. 
• The ECB minutes and US inflation will set the tone. 
• The technical picture is mixed for the pair.

The EUR/USD is trading below 1.1700, a result of US Dollar strength across the board. There are several reasons for the upswing in the US currency. The greenback is correcting after spending some time on the back foot. The news that the US is readying new tariffs worth $200 billion on Chinese goods also helped the greenback, especially as China’s response is relatively muted so far. Fresh reports suggest the world’s largest economies may resume negotiations and this helps the pair slightly recover.

Also, US Producer Prices came out slightly above forecasts on Wednesday. While PPI is not a top-tier indicator, it bolstered the US Dollar ahead of the more critical Consumer Price Index (CPI) due today. The critical Core CPI YoY is projected to accelerate from 2.2% in May to 2.3% in June, strengthening the case for a rate hike in September.

See the preview: Rising prices should boost the buck

The NATO Summit continues amid acrimony between the US and its European allies. A row over defense spending has triggered an emergency, unplanned session in Brussels. US President Donald Trump tied NATO spending to trade relations and markets may react.

The European Central Bank will also have its say. A report that came out on Wednesday suggested that there is a controversy within the ranks of the ECB regarding the meaning of “through the summer of 2019”. Some want a rate hike to come before September next year. The publication had a short-lived positive effect on the pair.

Speculation about the ECB’s next moves will also be seen in the ECB Policy Meeting Accounts, which may even touch on trade. The rise of energy inflation may also gain traction.

See: ECB Minutes Preview: How dovish is Draghi? Three things to watch

EUR/USD Technical Analysis

The EUR/USD is trading in a downtrend channel as shown by the thick black lines on the 4-hour chart. It is currently in the lower part of the circuit. The Relative Strength Index is now below 50 and downside Momentum is on the rise. The 50 and 200 Simple Moving Averages hug the pair.

Support awaits at 1.1665 which was the low point on July 11th. It is followed by 1.1630 which supported the pair on July 4th, and 1.1590 which was a low point on July 2nd.

Looking up, 1.1690 is an immediate line of resistance after working as a cushion on July 10th. 1.1720 was a top on two occasions: in early July and in late June. 1.1795 capped the pair on July 9th.

More: Trade War from the Trenches: Battle moves to Europe, three things to watch