EUR/USD Bulls Eye PMIs and German Inflation for a Run at $1.07

Bob Mason
Updated: Mar 1, 2023, 07:02 GMT+00:00

It is a busy day for the EUR/USD. Private sector PMIs, German retail sales, and German inflation numbers will deliver direction ahead of the US session.

EUR/USD technical analysis - FX Empire

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It is a busy day ahead for the EUR/USD. Early in the European session, German retail sales figures will draw plenty of interest. With the ECB expecting a pickup in consumption on softer inflation, weak numbers would question the more optimistic economic outlook.

However, manufacturing PMI numbers from Italy and Spain and finalized PMIs from France, Germany, and the Eurozone will also draw interest. Expect revisions to prelim numbers to move the dial.

In a busy session, German prelim inflation numbers for February will also need consideration. An unexpected pickup in German inflationary pressures would drive demand for the EUR.

In the latest ECB Economic Bulletin, the ECB noted that rising wage growth and declining energy price inflation should ease the loss of purchasing power and support consumption. Consumer confidence would need to improve to support the ECB’s outlook on consumption. A pickup in inflationary pressures and a slump in retail sales would test the theory.

After the latest stats, investors need to monitor ECB member speeches. However, with no ECB Executive Board members on the calendar to speak today, investors should track ECB Executive Board member commentary with the media.

Ahead of the European session, China PMI numbers for February supported riskier assets and the EUR/USD. The all-important Caixin Manufacturing PMI increased from 49.2 to 51.6 versus a forecasted 50.2.

EUR/USD Price Action

At the time of writing, the EUR/USD was up 0.10% to $1.05834. A mixed start to the day saw the EUR/USD fall to an early low of $1.05652 before rising to a high of $1.05864.

EUR/USD finds early support.
EURUSD 010323 Daily Chart

Technical Indicators

The EUR/USD needs to move through the $1.0597 pivot to target the First Major Resistance Level (R1) at $1.0621 and the Tuesday high of $1.06453. A return to $1.06 would signal a bullish session. However, the EUR/USD would need the stats and the ECB chatter to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0670 and resistance at $1.07. The Third Major Resistance Level (R3) sits at $1.0743.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0548 into play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.05. The Second Major Support Level (S2) at $1.0524 should limit the downside. The Third Major Support Level (S3) sits at $1.0451.

EUR/USD support levels in play below the pivot.
EURUSD 010323 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 50-day EMA ($1.06213). The 50-day EMA slipped back from the 200-day EMA, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.

A move through R1 ($1.0621) and the 50-day EMA ($1.06213) would give the bulls a run at the 100-day EMA ($1.06665) and R2 ($1.0670). A move through the 50-day EMA would send a bullish signal. However, failure to move through the 50-day EMA ($1.06213) would leave the Major Support Levels in play.

EMAs are bearish.
EURUSD 010323 4-Hourly Chart

The US Session

Looking ahead to the US session, it is a relatively busy day on the US economic calendar. Manufacturing sector PMIs will be in focus. We expect the ISM Manufacturing PMI to have more influence on the USD/JPY.

Following the latest round of US economic indicators, investors should also monitor FOMC member chatter.

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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