EUR/USD ticks higher as trade war fears weigh on US Dollar

• The Euro extends its rally for the third consecutive day and reaches weekly highs beyond 1.1550.
• US-China escalating trade tensions and Fed monetary easing hopes are weighing on the US Dollar.
• EUR/USD is testing trendline resistance around 1.1670, with bulls aiming for 1.1730.

EUR/USD is trading higher for the third consecutive day on Thursday and changes hands at one-week highs beyond 1.1650 at the time of writing. Investors' concerns about the escalating trade tensions between the US and China and the lack of progress in the US federal government's shutdown are eroding confidence in the US Dollar.

US President Donald Trump failed to calm markets on Wednesday, affirming in a TV interview that the US is already in a trade war with China, although his Treasury Secretary, Scott Bessent, tried to tone down the White House's rhetoric and said that an extension of the trade truce is still possible.

The Federal Reserve's (Fed) Beige Book, released on Wednesday, echoed Chairman Jerome Powell's comments from the day before and highlighted the slow employment creation as businesses face headwinds from trade tariffs. These conclusions strengthen the case for further interest rate cuts in the coming months and increase pressure on the US Dollar.

In the economic calendar, the Eurozone Trade Balance might provide some fundamental guidance to the Euro before European Central Bank (ECB) President Christine Lagarde's speech. In the US session, the Philadelphia Fed Manufacturing Survey will be one of the few economic indicators released this week, ahead of a string of speeches from Fed policymakers.

Daily digest market movers: Mounting US-China trade tensions keep hurting the US Dollar

• The US Dollar remains on its back foot. Concerns that the escalation of the tensions will take the trade relationships between the world's two major economies to a point of no return are undermining confidence in the US Dollar.
• Investors remain hopeful that next week's meeting between Trump and Chinese Prime Minister Xi Jinping may bring things back to normal, meaning a further extension of the trade truce, which ends on November 1, but the Greenback might remain vulnerable up to that moment.
• On Wednesday, the Federal Reserve assessed that US economic activity remained resilient over the last months, while consumer spending inched down. Employment demand remained muted amid economic uncertainty and higher prices due to rising import costs.
• Eurostat data reported that the Eurozone's Industrial Production contracted at a 1.2% pace in August following a 0.3% increment in July. These figures improve the 1.6% decline forecasted by market analysts and, therefore, the impact on the Euro was minimal.

Technical Analysis: EUR/USD is testing the channel top at 1.1670

EUR/USD's bullish momentum improved on Wednesday as price action breached the neckline of a Double Bottom pattern at 1.1635. This is often a signal of a trend shift, but bulls will need to break the top of the descending channel at the 1.1670 area, which is under pressure at the moment.

The measured target of the Double Bottom pattern is at the October 6 high, near 1.1730. Further up, the next resistance would be the October 1 high, near 1.1780, although that one seems too far a target for this Thursday.

To the downside, the previous resistance, at 1.1630 is likely to act as support ahead of Wednesday's low in the area of 1.1600. A bearish move below these levels would bring the October 9, and 14 lows at 1.1542 back into focus.