EUR/USD: Key resistance scaled ahead of Draghi’s speech, US-China trade talks pivotal

• EUR/USD has violated the stiff 21-day moving average resistance.  
• The pair could rise to 1.11 next week if the US-China trade talks end with a partial deal.  

The EUR/USD pair has found acceptance above a key hurdle and could see an extended relief rally in the short-term if the ongoing US-China trade talks end on a positive note.

The currency pair closed above the 21-day moving average (MA) on Thursday, signaling a continuation of the recovery rally from recent lows near 1.0879. The 21-day MA capped the upside for five straight days, starting from Oct. 3 to Oct. 9.

The European Central Bank (ECB) President Draghi is scheduled to speak at 09:30 GMT. The outgoing President is expected to reiterate his dovish stance. The EUR, however, may show resilience, as the markets seem to have priced in the ECB’s recent easing. Also, currently the focus is on the dovish Federal Reserve expectations and the US-China trade talks.

All eyes on US-China trade talks

The US  and China are currently in the midst of high-level trade negotiations in Washington.

President Trump said in a tweet in the Asian session that he will meet China’s Vice Premier Liu He on Friday, raising hopes that the two sides could make progress on trade issues.

Moreover, expectations of a partial trade deal have been built in the market place following Thursday’s Bloomberg report on a potential US-China currency pact.

The EUR will likely challenge Sept.13’s high of 1.1110 next week if there is a partial deal, leading to a suspension of the planned US tariff hikes – the US is scheduled to increase duties on $250 billion worth of Chinese goods from 25% to 30% on October 15. Also, a 15% tariff on an additional $160 billion worth of Chinese imports is also expected to kick in on December 15, according to CNBC.

However, if the talks fail, the US will likely go ahead with the planned tariff hike, leading to risk aversion and a drop in EUR/USD.

The final German Consumer Price Index for September scheduled for release at 06:00 may be ignored by the markets unless there is a significant revision to the preliminary figures released earlier this month.