A EUR/USD Move Through $1.07 in the Hands of ECB President Lagarde

It is a busy day for the EUR/USD on the economic calendar. Early in the European session, November car registration figures for France, Italy, and Germany will draw interest alongside German wholesale price numbers for November.

A rise in car registration numbers and a pickup in wholesale inflation should deliver EUR/USD support.

Finalized inflation numbers for France are also due but will likely have a muted impact on the EUR/USD, barring a revision from prelim numbers.

While the stats will draw interest, the ECB monetary policy decision and press conference will be the main event. Investors expect a 50-basis point interest rate hike and a 50-basis point increase in the deposit facility rate.

However, following the Fed’s hawkish 50-basis point rate hike on Wednesday, the ECB will need to deliver a hawkish outlook of its own to drive demand for the EUR, placing the spotlight on the ECB President Lagarde press conference.

The ECB’s economic and inflation projections and policy outlook will likely be the key driver. In the October ECB Press Conference, ECB President Christine Lagarde noted that the ECB would be able to look ahead once the staff projections were available in December.

An improved economic growth outlook and a hawkish monetary policy outlook would likely send the EUR/USD through $1.07.

EUR/USD Price Action

At the time of writing, the EUR was down 0.12% to $1.06692. A mixed start to the day saw the EUR/USD rise to an early high of $1.06833 before falling to a low of $1.06678.

Technical Indicators

The EUR/USD needs to avoid the $1.0665 pivot to target the First Major Resistance Level (R1) at $1.0712. Risk-on sentiment and a hawkish ECB would support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0742. The Third Major Resistance Level (R3) sits at $1.0818.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0635 into play. However, barring an ECB-fueled sell-off, the EUR/USD pair should avoid sub-$1.06 and the Second Major Support Level (S2) at $1.0589.

The third Major Support Level (S3) sits at $1.0512.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.05520). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.0635), S2 ($1.0589), and the 50-day EMA ($1.05520) would support a breakout from R1 ($1.0712) to target R2 ($1.0742). However, a fall through S1 ($1.0635) would bring S2 ($1.0589) and the 50-day EMA ($1.05520) into play. The 200-day EMA sits at $1.03362.

The US Session

It is a busy day ahead for the dollar. The weekly jobless claims, Philly Fed Manufacturing PMI, and retail sales figures will likely have the most influence.

Following the Fed’s interest rate decision on Wednesday, an unexpected spike in jobless claims, a slump in retail sales, and a deeper contraction in manufacturing sector activity would test appetite for the dollar.

With the FOMC blackout period over, FOMC member chatter will also need monitoring.