EUR/USD Bulls Eye $1.10 as Policy Divergence Tilts in Favor of the EUR
It is a quiet day ahead for the EUR/USD. There are no economic indicators from the euro area for investors to consider today.
The lack of stats will leave the EUR/USD in the hands of investor sentiment toward monetary policy. While Fed Chair Powell sent riskier assets into negative territory on Wednesday, the Fed Chair signaled a shift in forward guidance, which was good enough for the EUR/USD bulls.
The ECB remains steadfast in its commitment to tame inflation, tilting the monetary policy divergence scales in favor of the EUR.
With no stats to consider and monetary policy in focus, investors should monitor ECB member speeches. ECB Chief Economist Philip Lane speaks today. We expect EUR/USD sensitivity to comments relating to inflation, the economic outlook, and monetary policy.
EUR/USD Price Action
This morning, the EUR/USD was up 0.41% to $1.08986. A bullish start to the day saw the EUR/USD rise from an early low of $1.08544 to a high of $1.09010.
The EUR/USD needs to avoid the $1.0842 pivot to target the First Major Resistance Level (R1) at $1.0925. A move through the morning high of $1.09010 would signal a bullish session. However, the EUR/USD needs hawkish ECB chatter and weak US economic indicators to support a breakout session.
In the case of an extended rally, the bulls will likely test resistance at $1.0950 but fall short of the Second Major Resistance Level (R2) at $1.0995. The Third Major Resistance Level (R3) sits at $1.1149.
A fall through the pivot would bring the First Major Support Level (S1) at $1.0772 into play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.07 and the Second Major Support Level (S2) at $1.0689. The Third Major Support Level (S3) sits at $1.0535.
Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The EUR/USD sits above the 50-day EMA ($1.07124). The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.
A hold above S1 ($1.0772) and the 50-day EMA ($1.07124) would support a breakout from R1 ($1.0925) to give the bulls a run at $1.0950 and R2 ($1.0995). However, a fall through the S1 ($1.0772) would bring the 50-day EMA ($1.07124) and S2 ($1.0689) into play. A fall through the 50-day EMA would send a bearish signal.
The US Session
Looking ahead to the US session, it is a relatively quiet day on the US economic calendar. US current account, jobless claims, building permits, and new home sales figures will be in focus. While housing sector data has drawn more interest in recent months, the jobless claims should have more influence on the EUR/USD pair.
Economists forecast initial jobless claims to increase from 192k to 197k. Sub-200k would continue to reflect very tight labor market conditions.