EUR/USD and a Return to $1.08 in the Hands of Central Bank Chatter
It is a relatively busy day ahead for the EUR/USD. Early in the European session, French nonfarm payrolls for Q4 will draw interest. Steady employment across the euro area has supported a pickup in consumer confidence to drive consumption. Weak numbers would test support for the EUR. Economists forecast a 0.2% increase following a 0.4% rise in Q3.
Later in the morning, Italian retail sales figures for December will likely have more influence on the EUR/USD pair. According to Eurostat, euro area retail sales slumped by 2.7% in December. Economists forecast Italian retail sales to fall by 0.8%.
Beyond the stats, investors do need to consider ECB member speeches. Frank Elderson and Andrea Enria host an ECB Banking Supervision press conference this afternoon.
On Tuesday, ECB member Isabel Schnabel released an ECB press release titled ‘Monetary Policy in Times of Pandemic and War’ that highlighted elevated inflation, supporting the need for the ECB to push ahead with rate hikes.
However, ECB members would have to deviate from the expected 50-basis point March interest rate hike to influence the EUR/USD.
EUR/USD Price Action
At the time of writing, the EUR was up 0.03% to $1.07265. A mixed start to the day saw the EUR/USD fall to an early low of $1.07218 before rising to a high of $1.07270.
The EUR/USD needs to avoid a fall through the $1.0720 pivot to target the First Major Resistance Level (R1) at $1.0770. A move through the Tuesday high of $1.07665 would signal a bullish session. However, the EUR/USD would need the stats and ECB member chatter to support a breakout session.
In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0817. The Third Major Resistance Level (R3) sits at $1.0915.
A fall through the pivot would bring the First Major Support Level (S1) at $1.0673 into play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.0650 and the Second Major Support Level (S2) at $1.0622.
The third Major Support Level (S3) sits at $1.0525.
Looking at the EMAs and the 4-hourly chart, the EMAs send a more bearish signal. The EUR/USD sits below the 200-day EMA ($1.07513). The 50-day EMA converged on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.
A bearish cross of the 50-day EMA through the 100-day EMA would support a fall through S1 ($1.0673) to bring S2 ($1.0622) and sub-$1.060 into view. However, a move through the 200-day EMA ($1.07513) and R1 ($1.0770) would give the bulls a run at R2 ($1.0817). A move through the 50-day EMA would send a bullish signal.
The US Session
It is a quiet day on the US economic calendar. There are no US economic indicators for investors to consider this afternoon. However, FOMC members Williams, Waller, and Barr will speak today. Views on inflation, labor market conditions, and monetary policy would provide direction.