EUR/USD: Focus on ECB's economic forecasts and Draghi's tone

• The EUR/USD has cleared a key trendline resistance, possibly on renewed hopes of US-China trade talks.
• The ECB is widely expected to keep rates unchanged, so the focus is on the latest staff forecasts and Draghi's tone at the presser.

The EUR/USD found acceptance above the trendline connecting the Aug. 28 high and Aug. 30 high in Asia, as the USD fell on renewed hopes of US-China trade talks.

So, technically speaking, the stage is set for a re-test of the Aug. 28 high of 1.1733. However, it all depends on the ECB President Mario Draghi's tone at the presser, scheduled at 12:30 GMT today.

The markets are expecting President Draghi to sound dovish today, courtesy of the recent slide in inflation. More importantly, the ECB's QE tapering is set to begin next month and hence, the bank will likely adopt a dovish stance to cushion in the bond markets and the economy,  

As a result, the bull breakout witnessed in the EUR/USD 4-hour chart could fail, especially if the US August CPI, due at 12:30 GMT, beats estimates by a wide margin, reinforcing hawkish Fed expectations.

On the other hand, if Draghi sounds neutral/hawkish, then the common currency could quickly jump to the recent highs above 1.17.

EUR/USD Technical Levels

Resistance: 1.1659 (resistance as per the 4-hour chart), 1.17 (psychological level), 1.1713 (recent high)

Support: 1.1565 (higher low support on the 4-hour chart), 1.1526 (Sep. 9 low), 1.15 (psychological level)