China vows to retaliate against the US on latest tariffs measures

The headline here sent yen pairs a tad bit lower and helped lift the dollar a little as E-minis and Treasury yields moved slightly to the downside. As a result, EUR/USD fell from its highs of 1.1718 on the day to be flat on the day now at 1.1683.

The pair moved lower earlier in the day as the US announced its latest round of tariffs on Chinese goods but then recovered as markets faded the trade rhetoric. But China's latest response is helping to keep things in check but it feels like it's a matter of time before markets do what they do best again.

With Treasury yields poised to reclaim and retest the 3% handle, it's helping to stem any decline in yen pairs on the day and that is particularly supporting risk assets and the euro has benefited from the spillover thus far.

However, the key for EUR/USD lies in the 100-day MA. Not just for the dollar index as mentioned here, but also for the pair itself:

The 100-day MA (red line) sits at 1.1670 currently but a critical break above that level and the 1.1700 handle will be what buyers need to set the platform for a further leg to the upside. Of note, the pair also has daily resistance to come between 1.1730-50 and that will be a key area for buyers to break above as well in order to build more conviction to move price higher.

The ongoing US-China trade rhetoric by right should be helping to provide flows into the dollar but the recent exhaustion in the dollar's bullish momentum and the fact that equities have shrugged off the latest headlines on trade suggests that markets aren't exactly living in total fear that global growth is going to be handicapped by the trade escalation.

As mentioned before, fundamentals may work one way but if the technical picture doesn't support it then the trade just isn't there. Right now, near-term bias continues to favour a more bullish EUR/USD and hold a break above the 100-day MA and 1.1700 then the recent upside move here could have legs to run still.

Support

- 1.1650-56 (swing region, 100-hour MA)

- 1.1626 (200-hour MA)

- 1.1600 (bids, swing region)

- 1.1575-80 (swing region)

Resistance

- 1.1700 (swing region)

- 1.1730-50 (swing region)

- 1.1791 (July high)

- 1.1800 (offers)