EUR/USD and $1.10 in the Hands of ECB Chief Economist Philip Lane

It is a quiet start to the week for the EUR/USD. There are no economic indicators from the euro area for investors to consider today. The lack of economic indicators will leave central bank chatter and geopolitics in focus.

US Secretary of State Antony Blinken made the first Secretary of State visit to China in five years. Blinken met with Foreign Minister Qin Gang, with both sides reportedly keen to build stable and predictable relations. While Taiwan was a hot topic, a meeting with China’s Premier Xi Jinping would be market-friendly.

While the event was positive, tackling Russia and Taiwan will be among a laundry list of issues suggesting slow progress ahead.

Later today, ECB chatter will move the dial. After the hawkish ECB press conference, Chief Economist Philip Lane is on the calendar to speak today. Comments relating to inflation, the economic outlook, and monetary policy would influence.

ECB Executive Board members Isabel Schnabel and Luis de Guindos will also deliver speeches.

EUR/USD Price Action

This morning, the EUR/USD was down 0.05% to $1.09354. A mixed start to the day saw the EUR/USD fall to an early low of $1.09294 before rising to a high of $1.09463.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The EUR/USD sits above the 50-day EMA ($1.08297). The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA ($1.08297) would support a breakout from R1 ($1.0968) to give the bulls a run at R2 ($1.0996) and $1.10. However, a fall through S1 ($1.0915) would bring S2 ($1.0890) and sub-$1.0850 Major Support Levels into play. A fall through the 50-day EMA ($1.08297) would signal a near-term bullish trend reversal.

Resistance & Support Levels

The EUR/USD has to move through the $1.0943 pivot to target the First Major Resistance Level (R1) at $1.0968 and the Friday high of $1.09705. A return to $1.0950 would signal a bullish session. However, the EUR/USD needs further ECB to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0996 and resistance at $1.10. The Third Major Resistance Level (R3) sits at $1.1049.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0915 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.09 and the Second Major Support Level (S2) at $1.0890. The Third Major Support Level (S3) sits at $1.0837.

The US Session

Looking ahead to the US session, it is a quiet day on the US economic calendar. The US markets are closed for Juneteenth Day. A lack of US economic indicators will leave Fed chatter to influence.

After better-than-expected Michigan Consumer Sentiment and Michigan Consumer Expectation numbers and hawkish Fed chatter from Friday, monetary policy divergence between the ECB and the Fed narrowed marginally but remained in favor of the ECB.

FOMC member Christopher Waller and Thomas Barkin supported more rate hikes on Friday, referencing current inflation levels.

According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 74.4%, up from 52.8% one week earlier. Significantly, the chances of a September 25-basis point interest rate hike rose from 50.0% to 67.1% over the week, while bets on a 50-basis point interest rate hike fell from 15.7% to 11.2%.

The hawkish chatter and bets of rate hikes beyond July came ahead of Fed Chair Powell testimony on Tuesday. Fed Chair Powell angst tested buyer appetite this morning.