EUR/USD and $1.10 in the Hands of Fed Chair Powell Day 1 Testimony

It is a relatively quiet Wednesday for the EUR/USD. There are no economic indicators from the euro area to draw interest today. The lack of economic indicators will leave central banks in the spotlight.

A non-committal ECB Chief Economist Philip Lane vis-a-vis a September move leaves ECB Executive Board members to move the dial. On Monday, Lane acknowledged the ECB would likely raise rates in July while saying it was too early to talk about a September move that will be data-dependent.

While ECB Executive Board members have lined up behind ECB President Lagarde to deliver a likely hike in July, the jury is out on what to expect in September, with cracks in the euro area economy likely to test the doves.

With no economic indicators to consider, investors should track ECB commentary throughout the day. ECB Executive Board member Isabel Schnabel is on the calendar to speak today. Hawkish September policy chatter would move the dial.

EUR/USD Price Action

This morning, the EUR/USD was down 0.02% to $1.09156. The EUR/USD rose to an early high of $1.09224 before falling to a low of $1.09117.

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 ($1.08643). The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA crossing through the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.0891) and the 50-day EMA ($1.08643) would support a breakout from R1 ($1.0945) to give the bulls a run at R2 ($1.0973) and $1.10.

However, a fall through S1 ($1.0891) would bring the 50-day EMA ($1.08643) and S2 ($1.0864) into play. A fall through the 50-day EMA would send a bearish signal.

Resistance & Support Levels

The EUR/USD has to move through the $1.0919 pivot to target the First Major Resistance Level (R1) at $1.0945 and the Tuesday high of $1.09462. A return to $1.0950 would signal a bullish session. However, the EUR/USD needs Fed Chair Powell to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0973 and resistance at $1.10. The Third Major Resistance Level (R3) sits at $1.1027.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0891 in play. However, barring a Fed-fueled sell-off, the EUR/USD pair should avoid sub-$1.0850. The Second Major Support Level (S2) at $1.0864 should limit the downside. The Third Major Support Level (S3) sits at $1.0810.

The US Session

Looking ahead to the US session, it is another quiet day on the US economic calendar. There are no US economic indicators to influence. The lack of economic indicators will leave Fed Chair Powell and FOMC member commentary to move the dial.

Fed Chair Powell will give the first day of testimony. While the FOMC press conference was only last week, investors should look for any deviation from the FOMC press conference script.

The anticipation of Fed Chair Powell’s testimony on interest rate expectations was telling. According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 76.9% on Tuesday versus 74.4% on Friday. The chances of the Fed lifting the Fed Funds Rate to 5.75% in September increased from 8.9% to 11.5%.