EUR/USD Bears Eye Return to Sub-$1.04 on German Stats and the ECB

It is a busy day for the EUR/USD on the economic calendar. Early in the European session, the German economy is in the spotlight, with industrial production figures due. Following Tuesday’s factory orders and the latest manufacturing PMI, a larger-than-expected fall in production would test EUR/USD support.

Economists forecast a 0.6% decline in October to reverse a 0.6% increase from September.

Later in the session, French trade data and Italian retail sales figures are also due ahead of finalized Q3 GDP numbers for the Eurozone. Barring big misses from France and Italy, we expect the Eurozone’s GDP numbers to draw more interest. Revisions to prelim figures would move the dial.

For the ECB, another set of disappointing numbers would ease bets of a hawkish policy move this month. With the markets second-guessing the ECB’s next move, ECB chatter will influence. ECB members Philip Lane and Fabio Panetta will speak today. Additionally, the ECB will release the Consumer Expectations Survey results for October.

With consumers facing high energy bills and elevated food prices, the October survey could put more pressure on the ECB to rein in the hawks.

EUR/USD Price Action

At the time of writing, the EUR was down 0.03% to $1.04593. A range-bound start to the day saw the EUR/USD rise to an early high of $1.04700 before easing back.

Technical Indicators

The EUR/USD needs to move through the $1.0485 pivot to target the First Major Resistance Level (R1) at $1.0511 and the Tuesday high of $1.05329. Today’s stats need to beat forecasts, and ECB member chatter would have to be hawkish to support a bullish session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0559. The Third Major Resistance Level (R3) sits at $1.0632.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0437 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.04. The Second Major Support Level (S2) at $1.0411 should limit the downside.

The third Major Support Level (S3) sits at $1.0338.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.04465). The 50-day EMA moved away from the 100-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.04465) would support a breakout from R1 ($1.0511) to target R2 ($1.0559). However, a fall through the 50-dau EMA ($1.04465) would bring S1 ($1.0437) into play. The 200-day EMA sits at $1.02353.

The US Session

It is a quiet day ahead, with finalized US nonfarm productivity and unit labor costs for the third quarter in focus. Economists forecast unit labor costs to rise by 3.1% in Q3 versus a prelim 3.5%. An upward revision would raise more doubts over a December Fed pivot.

According to the FedWatch Tool, the probability of a 75-basis point December rate hike fell from 24.2% to 21.8%. However, no FOMC members are influencing the reading. The Fed entered the blackout period on Sunday.