• The EUR/USD continues its gradual rise despite the US announcement on trade tariffs.
  • China’s retaliated is awaited, and the US may respond to the move as well.
  • The technical picture looks upbeat for the pair.
  • The EUR/USD is trading around 1.1700, holding onto Monday’s gains and even slightly extending them. After two weeks of suspense, the US went forward and announced a 10% on $200 billion worth of Chinese goods. The duties will come into effect on September 24th and do not include some Apple products. The levy will rise to 25% at the end of the year.

    Markets were fully prepared after two weeks and comments by various officials. The 10% tariff is relatively low, and the move was well-telegraphed, two factors that can explain the calm reaction.

    China’s response is awaited. The world’s second-largest economy is set to impose counter-duties on around $60 billion of American goods but can also hit back with slowing down critical exports of goods to US companies. In addition, the authorities can continue with devaluing the yuan, making Chinese products more attractive despite higher prices.

    In the recent past, escalations in the trade wars have resulted in a stronger US Dollar and Japanese yen. This may happen once we learn about China’s response.

    Elsewhere, euro-zone inflation was confirmed at 2% on the headline and 1% on the core for August, as expected. European Central Bank President Mario Draghi speaks in Paris, but he is unlikely to talk about monetary policy. There are no noteworthy economic indicators, leaving the focus on any trade-related headlines.

    EUR/USD Technical Analysis

    The EUR/USD is trading above the 50 and 200 Simple Moving Averages on the four-hour chart. In addition, the Relative Strength Index (RSI) is pointing to the upside. All are bullish signs. The only thing that is lacking is Momentum in this gradual ascent.

    1.1720 was the peak last week and the pair got close to it earlier today. Close by, 1.1735 was the high point in August and 1.1750 was a quadruple top in July. Above this dense area, 1.1795 is notable after capping the pair in early July. 1.1850 was a swing high in mid-June.

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