EUR/USD and a Return to $1.06 in the Hands of ECB President Lagarde

It is a quiet day for the EUR/USD on the economic calendar. Early in the European session, the French economy is in the spotlight, with nonfarm payroll figures due. However, barring a sharp decline, the numbers are unlikely to have a material impact on the EUR.

Economic data from Germany and the Eurozone beat forecasts on Wednesday, supporting the EUR/USD recovery to $1.05. The return to $1.05 came despite recent economic indicators from the US, which raised question marks over the expectations of a December Fed pivot.

With the economic calendar on the light side, market risk sentiment will influence ahead of ECB commentary and the US session.

Early in the Wednesday session, trade data from China disappointed, fueling fears of a global recession. Geopolitics also tested the EUR, with the markets reacting to Putin’s warning that nuclear risk is rising. Assurances that Russia would not use the weapon first limited the impact.

With geopolitical risk and concerns over the economic outlook influencing, the markets will need to consider ECB commentary. ECB President Christine Lagarde will speak on two separate occasions today.

Following the upward revision to Eurozone economic growth figures for Q3, hawkish comments would deliver further EUR/USD gains.

EUR/USD Price Action

At the time of writing, the EUR was up 0.02% to $1.05073. A mixed start to the day saw the EUR/USD rise to an early high of $1.05152 before easing back.

Technical Indicators

The EUR/USD needs to avoid the $1.0500 pivot to target the First Major Resistance Level (R1) at $1.0556. ECB chatter would have to be hawkish to support a breakout from the Wednesday high of $1.05498.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0606. The Third Major Resistance Level (R3) sits at $1.0713.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0449 into play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.04 and the Second Major Support Level (S2) at $1.0393.

The third Major Support Level (S3) sits at $1.0286.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.04590). 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 the 50-day EMA ($1.04590) would support a breakout from R1 ($1.0556) to target R2 ($1.0606). However, a fall through the 50-day EMA ($1.04590) would support a fall through S1 ($1.0449) to bring S2 ($1.0393) into play. The 200-day EMA sits at $1.02510.

The US Session

It is a quiet day ahead, with weekly jobless claims figures in focus. However, barring a significant move from current levels, the numbers are unlikely to impact market sentiment toward Fed monetary policy and the EUR/USD.

The markets are still betting on a December Fed pivot, despite the latest US Jobs Report and ISM Non-Manufacturing PMI. A sharp fall to sub-200k levels could raise bets of another hawkish interest rate hike.

According to the FedWatch Tool, the probability of a 75-basis point December rate hike rose from 21.8% to 25.3%. However, no FOMC members are influencing the reading. The Fed entered the blackout period on Sunday.