EUR/USD and a Return to Sub-$1.03 in the Hands of Euro Area Inflation

It is a busy day for the EUR/USD on the economic calendar. Early in the session, the French economy will be in the spotlight, with consumer spending, GDP, and inflation numbers due. Following the inflation figures from Germany and Spain, softer inflation figures would likely test EUR support.

Economists forecast the French annual inflation rate to accelerate from 6.2% to 6.3%.

Italian GDP and inflation and German unemployment figures will also draw interest.

However, prelim Eurozone inflation figures for November will be the key driver. Softer inflation figures would allow the ECB to make a less aggressive December policy move. Economists forecast the Eurozone annual inflation rate to soften from 10.6% to 10.4%.

While the economic calendar is on the busier side, there are no ECB member speeches today, leaving investors to monitor chatter with the media. Softer-than-forecasted Eurozone inflation figures would give the ECB doves a voice.

EUR/USD Price Action

At the time of writing, the EUR was flat at $1.03287.

Technical Indicators

The EUR/USD needs to move through the $1.0348 pivot to target the First Major Resistance Level (R1) at $1.0376 and the Tuesday high of $1.03945. Eurozone inflation figures will need to beat forecasts to support a bullish session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0422 and resistance at $1.0450. The Third Major Resistance Level (R3) sits at $1.0497.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0301 in play. However, barring another sell-off, the EUR/USD pair should avoid sub-$1.020. The Second Major Support Level (S2) at $1.0273 should limit the downside. However, dovish ECB member commentary and a sub-10% Eurozone annual inflation rate could deliver a sharp pullback.

The third Major Support Level (S3) sits at $1.0199.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 100-day EMA ($1.02660). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA moved away from the 200-day EMA, delivering mixed signals.

A move through the 50-day EMA ($1.03429) would support a breakout from R1 ($1.0376) to target R2 ($1.0422) and $1.0450. However, failure to move through the 50-day EMA ($1.03429) would bring S1 ($1.0301) into play. The 200-day EMA sits at $1.01484.

The US Session

It is a busy day ahead, with ADP employment change and JOLTs job openings the main stats of the day. An upbeat ADP report could refuel bets of a more hawkish December Fed rate hike.

Late in the US session, Fed Chair Powell will take center stage. Strong labor market conditions and the current inflation environment leave another 75-basis point rate hike on the table.

Other stats include Q3 GDP and housing sector numbers that should have less impact on the EUR/USD.