EUR/USD - Key trendline hurdle intact, focus on trade war talk & Fed

• Euro failed to take out descending trendline on dovish Draghi.  
• Increased trade war fears could hurt USD.
• Focus on Fed.

The EUR/USD failed to take out the descending trendline (sloping lower from Feb. 16 high and March 8 high) yesterday after ECB's Draghi stressed the need to be patient and persistent because underlying inflation remains subdued.

The currency pair fell to 1.2347 before moving higher to 1.2384 in Asia, possibly due to rising fears of US-China trade war. The common currency will likely find bids if China talks targeted tariffs in response to Trump's plan to impose wider tariffs on Chinese goods.

That said, a big move is unlikely on account of caution ahead of the next week's Fed meeting. A 25 basis point rate hike has been priced-in. So, the tone of Fed statement and Powell's take on economy and inflation will indicate whether the fears of faster Fed tightening are well founded or exaggerated. Accordingly, the EUR/USD will likely exit the 1.2250-1.2450 range in a convincing manner.

EUR/USD Technical Levels

A daily close above the descending trendline resistance (seen today at 1.2407) would signal a continuation of the rally from the March 1 low of 1.2154 and open doors for re-test of 1.2538 (Jan. 25 high) and 1.2556 (Feb. 16 high).

On the other hand, a close below 1.2355 (5-day MA + 10-day MA) could yield a pullback to 1.2299 (ascending 50-day MA) and possibly to 1.2273 (March 9 low).