EUR/USD Bears to Target Sub-$1.0650 on German Industrial Production

Bob Mason
Published: Jun 7, 2023, 03:59 GMT+00:00

It is another busy session for the EUR/USD. However, with no Fed chatter to consider, the ECB and German economic indicators will be focal points.

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It is another busy day ahead for the EUR/USD. German industrial production numbers for April will draw plenty of interest early in the European session. German industrial production unexpectedly fell in March, raising concerns about the German economy. Manufacturing PMI numbers have also painted a gloomy outlook.

However, a pickup in production would provide little comfort following another fall in factory orders.

Economists forecast industrial production to fall by 1.3% in April, which would pressure the EUR/USD.

Later in the session, French trade data and Italian retail sales figures will also need consideration.

With the economic calendar on the busier side, investors should monitor central bank chatter throughout the Wednesday session. ECB Executive Board members Luis de Guindos, Fabio Panetta, and Edouard Fernandez-Bollo are on the calendar to speak today. Dovish commentary would catch the markets by surprise.

Earlier this morning, trade data from China set the tone. China’s USD trade surplus narrowed from $90.21 billion to $65.81 billion in May versus a forecasted $71.60 billion. Significantly, exports tumbled by 7.5% year-over-year, with imports down by 4.5%. Economists forecast exports to rise by 8.0% and imports to fall by 8.0%.

EUR/USD Price Action

This morning, the EUR/USD was down 0.01% to $1.06917. A mixed start to the day saw the EUR/USD rise to an early morning high of $1.07043 before falling to a low of $1.06887.

EUR/USD holds steady.
EURUSD 060623 Daily Chart

Technical Indicators

Resistance & Support Levels

R1 – $ 1.0728 S1 – $ 1.0662
R2 – $ 1.0763 S2 – $ 1.0631
R3 – $ 1.0829 S3 – $ 1.0565

The EUR/USD has to move through the $1.0697 pivot to target the First Major Resistance Level (R1) at $1.0728 and the Tuesday high of $1.07328. A return to $1.07 would signal a bullish session. However, the EUR/USD needs central bank commentary and economic indicators to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0763. The Third Major Resistance Level (R3) sits at $1.0829.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0662 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.06. The Second Major Support Level (S2) at $1.0631 should limit the downside. The Third Major Support Level (S3) sits at $1.0565.

EUR/USD support levels in play below the pivot.
EURUSD 060623 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs sent bearish signals. The EUR/USD sits below the 50-day EMA ($1.07217). The 50-day EMA pulled back from the 100-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.

A move through the 50-day EMA ($1.07217) and R1 ($1.0763) would give the bulls a run at R2 ($1.0763) and the 100-day EMA ($1.07643). However, failure to move through the 50-day EMA ($1.07217) would leave S1 ($1.0662) in view. A move through the 50-day EMA would send a bullish signal.

EMAs remain bearish.
EURUSD 060623 4-Hourly Chart

The US Session

It is another quiet US session. US trade data will need consideration early in the session. However, barring a sharp widening in the trade deficit, the numbers should have a limited impact on the EUR/USD.

While the economic calendar is light, no FOMC members are speaking today. The Fed entered the blackout period that ends on June 15.

According to the CME FedWatch Tool, the probability of a 25-basis point June interest rate hike slipped from 24.1% to 19.4% on Tuesday versus 66.6% one week earlier.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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