EUR/USD hesitates near weekly lows as trade tensions grow

• The Euro trades flat after bouncing from 1.1700 with investors still wary of risk.
• Trump's new taxes on copper and pharmaceuticals have increased uncertainty about global trade.
• The lack of progress in the Eurozone-US negotiations poses headwinds to a significant Euro recovery.
  

The EUR/USD pair is practically flat on Wednesday, near the bottom of the weekly range, as investors remain wary of risk after US President Donald Trump announced new tariffs on copper and pointed to significant restrictions on pharmaceuticals.

The Euro (EUR) found support at the 1.1700 area on Wednesday's Asian session after rejection at 1.1770 on the previous day, and is currently trading at 1.1730 in the early European session. The broader trend, however, remains bearish, with the pair correcting after a more than 2% rally in late June.

Trump took his trade war to the next stage after announcing 50% tariffs on imports of copper products and threatening a 200% levy on drugs if pharmaceutical firms do not relocate their production to the US within the next 12 months.

These measures come less than 24 hours after the US imposed 25% tariffs on Japan and Korea, the country's second and third major Asian partners. The deadline for their application was delayed to August 1, and US Government officials left a door open to adjustments if trading partners send their proposals, which contributed to easing the risk-averse reaction to the new tariffs.

In a more domestic scope, the trade negotiations between the Eurozone and the US do not seem to be at their best moment. Eurozone sources continue to express hopes of reaching a deal that will spare them from the 10% baseline levy, but Trump affirmed that he will send a tariff letter to the European Union this week. Not the best news for the Euro.

Daily digest market movers: The Euro loses ground with US tariffs in the air

• EUR/USD maintains a broader bearish tone this week. The US Dollar (USD) picks up, buoyed by its safe-haven status amid risk-averse markets and a 5-day rally in US Treasury yields. Investors, on the other hand, remain reluctant to place large Euro bets until the trade relationship between the Eurozone and the US clarifies.
• The fate of the Eurozone-US trade negotiation remains uncertain. Comments from the meeting have been mixed, with Trump saying that the EU was "very nice to us" but also "much worse than China". From the European side, the Swedish finance minister considered the US proposal "very bad". EU representatives are still hopeful of reaching a deal, but the US president announced that a tariff letter will be sent to the Eurozone in the next couple of days. The Euro is likely to remain on its back foot in the meantime.
• The Eurozone economic calendar is thin on Wednesday, with only European Central Bank speakers worth mentioning. They are likely to reiterate that the central bank is in a good place to wait for developments in the international trade scenario and their impact on growth and inflation.
• In the US, the highlight is the release of the FOMC Minutes, due later in the day at 18:00 GMT. Federal Reserve Chair Jerome Powell delivered a hawkish message that has been endorsed by the strong US employment figures seen in June. The risk for the US Dollar is on the upside.
• Data from Germany released on Tuesday revealed that the trade surplus increased by EUR 18.4 billion in May, from EUR 15.8 billion in April, against expectations of a slight decline to EUR 15.5 billion. The main reason behind the higher surplus, however, has been a larger-than-expected decline in imports, which points to slower domestic demand.
• In France, the trade deficit widened to EUR 7.76 billion in May from EUR 7.68 billion in April, slightly above the EUR 7.7 billion anticipated by market forecasts.

EUR/USD keeps trading within a corrective channel

EUR/USD recovery attempt was limited right below the descending trendline resistance from July 1 highs, at the 1.1770 area, which keeps the price action within a broadening wedge pattern. This figure reveals an emotional market, often appearing at major tops.

Technical indicators are on bearish territory, with the Relative Strength Index (RSI) wavering below the 50 level on the 4-hour chart, although the support area above 1.1680, where the 38.2% Fibonacci retracement level of the June 24 - July 1 rally meets the July 7 and 8 lows, seems a strong support level.

Below here, the pair might find support at 1.1630 - 1.1645, where previous highs meet the 50% Fibonacci retracement level of the mentioned late June rally.

On the upside, immediate resistance is the intraday high, at 1.1730, ahead of the mentioned trendline and the July 8 high at the 1.1765-1.1770 area.