EUR/USD Bulls Eye a Return to $1.11 on FOMC Member Chatter

Highlights

• The EUR/USD had a bullish start to the day, with overnight Fed commentary providing support.
• It is a busier day on the European economic calendar. Inflation and economic sentiment reports will be in focus.
• However, FOMC member commentary will continue to move the dial as investors monitor responses to the US Jobs Report.

It is a busier day ahead for the EUR/USD. Finalized German inflation numbers and ZEW Economic Sentiment will move the dial. Economists forecast the German ZEW Economic Sentiment to fall from -8.5 to -10.5 and the Eurozone ZEW Economic Sentiment Indicator to fall from -10 to -17.

Barring revisions to the German CPI numbers, the German ZEW Economic Sentiment will likely have more impact.

With the economic calendar on the busy side, ECB commentary will also need consideration. However, no ECB members are on the calendar to speak, leaving chatter with the media to move the dial.

The US Session

It is a quiet day on the US economic calendar, with no US economic indicators to provide direction. The quiet economic calendar will leave FOMC member commentary in focus, with FOMC member Bullard on the calendar to speak today.

FOMC members Barr, Bostic, and Daly weighed on the dollar, announcing the Fed monetary policy tightening cycle is nearing its end.

FOMC Member Mary Daly reportedly favored two further rate hikes this year but added,

“While the risks of doing too little are still greater than those of overdoing it on rate hikes, the two sides are getting into better balance as the Fed nears the last part of its hiking cycle.”

FOMC member Michael Barr noted that he thinks the Fed is close, with Raphael Bostic erring on the side of patience.

According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike was 92.4% versus 93.0% on Friday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 23.1%, down from 24.2% on Friday.

EUR/USD Price Action

Daily Chart

The Daily Chart showed a EUR/USD avoided a fall below the $1.10 psychological resistance level and the lower level of the $1.1000 – $1.1025 resistance band. Looking at the EMAs, the EUR/USD sat above the 50-day ($1.08735) and 200-day ($1.07322) EMAs, signaling bullish momentum over the near and longer term.

Notably, the 50-day EMA pulled further away from the 200-day EMA and reflected bullish momentum.

Looking at the 14-Daily RSI, the 62.52 reading signaled a bullish trend, aligned with the 50-day EMA. A hold above the lower level of the resistance band and the 50-day EMA ($1.08735) would support a run at the upper level of the $1.1000 – $1.1025 resistance band and $1.1050.

4-Hourly Chart

Looking at the 4-Hourly Chart, the EUR/USD broke the resistance at the $1.10 psychological level. The EUR/USD sits above the lower level of the $1.1000 – $1.1025 resistance band.

After the Monday gain, the EUR/USD sits above the 50-day ($1.09199) and 200-day EMA ($1.08780), sending bullish signals.

Significantly, the 50-day EMA pulled further away from the 200-day EMA, signaling a run at the upper level of the $1.1000 – $1.1025 resistance band and $1.1050.

The EUR/USD must avoid sub-$1.10 and the 50-day EMA ($1.09199) to target $1.1025. However, a fall through the resistance band would bring $1.0950 and the 50-day EMA ($1.09199) into view.

The 14-4H RSI reading of 70.75 indicates overbought territory. Notably, the RSI aligns with the 50-day EMA, supporting a run at the upper level of the $1.1000 – $1.1025 resistance band and $1.1050.