EUR/USD and a Run at $1.10 in the Hands of US Inflation Numbers
It is a busy day ahead for the EUR/USD. French consumer confidence and Spanish GDP numbers will draw interest early in the European session. A pickup in French consumer confidence would deliver EUR/USD support ahead of industrial sales figures from Italy.
However, an unexpected contraction in the Spanish economy could overshadow any upbeat numbers from France. Investors expect a short-lived and shallow euro area economic recession. A marked contraction in Q4 could bring uncertainty over the economic outlook for the Eurozone.
While the economic calendar will influence, investors need to consider ECB member speeches. ECB President Lagarde will speak later today. The ECB will also release private sector loans and loans to non-financial corporations that will give the markets a sense of credit appetite across the retail and corporate segments.
EUR/USD Price Action
At the time of writing, the EUR was down 0.08% to $1.08796. A mixed start to the day saw the EUR/USD rise to an early high of $1.09005 before falling to a low of $1.08786.
The EUR/USD needs to move through the $1.0889 pivot to target the First Major Resistance Level (R1) at $1.0928 and the Thursday high of $1.09295. A return to $1.09 would signal a bullish session. However, the EUR/USD would need better-than-expected stats and hawkish Lagarde commentary to support a breakout.
In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0968. The Third Major Resistance Level (R3) sits at $1.1048.
Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0849 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.080. The Second Major Support Level (S2) at $1.0810 should limit the downside.
The third Major Support Level (S3) sits at $1.0731.
Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.08544). The 50-day EMA pulled further 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 ($1.08544) would support a breakout from R1 ($1.0928) to target R2 ($1.0968). However, a fall through the 50-day EMA ($1.08544) and S1 ($1.0849) would bring S2 ($1.0810) into play. A fall through the 50-day EMA would signal a shift in sentiment.
The US Session
It is a busy day ahead on the US economic calendar. Core PCE Price Index and personal spending and income numbers for December will draw plenty of interest. An unexpected pickup in inflationary pressure and a more marked rise in personal income could question the market bets of a Fed pivot.
Later in the US session, finalized consumer sentiment figures will also provide direction. Revisions to prelim figures would move the dial.
While it is a busier day on the economic calendar, no FOMC members are speaking today. The Fed entered the blackout period on Saturday, January 21.