EUR/USD and a Return to $1.09 in the Hands of Euro Area GDP Numbers

It is a busy day ahead for the EUR/USD. The French economy will be in the spotlight early in the session. Prelim January inflation and Q4 GDP numbers will be in the spotlight this morning.

The prelim private sector PMI report for January showed a pickup in prices charged as firms looked to pass costs onto their customers. A pickup in inflationary pressure would support the hawkish ECB policy outlook. Better-than-expected GDP numbers would give the ECB the wriggle room to lift rates for longer.

From Germany, retail sales and employment figures will also be in focus ahead of prelim Q4 GDP numbers for the Eurozone. We expect the Eurozone GDP numbers to have more influence through the morning session.

Later in the day, prelim inflation figures from Germany will also draw interest. Economists forecast Germany’s annual inflation rate to accelerate from 8.6% to 9.2%, which should support a EUR/USD breakout.

While the economic calendar is on the busier side, investors need to consider ECB member speeches. However, no members are due to speak today, leaving chatter with the media to influence.

EUR/USD Price Action

At the time of writing, the EUR was flat at $1.08483. A mixed start to the day saw the EUR/USD rise to an early high of $1.08521 before easing back.

Technical Indicators

The EUR/USD needs to move through the $1.0867 pivot to target the First Major Resistance Level (R1) at $1.0895 and the Monday high of $1.09138. A return to $1.09 would signal a bullish session. However, the EUR/USD would need hotter-than-expected GDP numbers to support a breakout.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0942 and resistance at $1.0950. The Third Major Resistance Level (R3) sits at $1.1017.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0821 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.080 and the Second Major Support Level (S2) at $1.0792.

The third Major Support Level (S3) sits at $1.0718.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 100-day EMA ($1.08135). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA widened from the 200-day EMA, delivering mixed signals.

A move through the 50-day EMA ($1.08593) would support a breakout from R1 ($1.0895) to target R2 ($1.0942) and $1.0950. However, failure to move through the 50-day EMA ($1.08593) would give the bears a run at S1 ($1.0835) and the 100-day EMA ($1.08135). A move through the 50-day EMA would send a bullish signal.

The US Session

It is a busy day on the US economic calendar. Consumer confidence numbers for January will provide the EUR/USD direction. Other stats include Chicago PMI and housing sector numbers that should have a muted impact on the EUR/USD and riskier assets.

Economists forecast the CB Consumer Confidence Index to rise from 108.3 to 109.0.

No FOMC members are speaking today. The Fed entered the blackout period on Saturday, January 21.