EUR/USD Bulls to Target $1.045 on ECB Chatter and Inflation Numbers

It is a busy day for the EUR/USD on the economic calendar. Prelim inflation numbers for November are due. Figures from Germany will draw the most interest.

Economists forecast Germany’s annual rate of inflation to hold steady at 10.4%.

Other stats include Eurozone business and consumer sentiment figures for November. However, barring marked moves, the inflation figures will likely have more influence on the EUR/USD as investors look to second-guess the ECB’s next move.

With the economic calendar on the busier side, ECB member chatter will also need monitoring today. ECB members Luis de Guindos and Isabel Schnabel will speak today.

Last week, Schnabel favored more aggressive policy moves to target inflation, saying,

“Incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the ‘neutral’ rate.”

Earlier this month, ECB Vice President Luis De Guindos said that the ECB would “continue to raise interest rates, proceeding with prudence to get inflation back to target, even if this process takes an extended period.”

EUR/USD Price Action

At the time of writing, the EUR was up 0.05% to $1.03450. A mixed start to the day saw the EUR/USD rise to an early high of $1.03501 before easing back.

Technical Indicators

The EUR/USD needs to move through the $1.0389 pivot to target the First Major Resistance Level (R1) at $1.0448 and the Monday high of $1.04969. A pickup in inflationary pressure and hawkish ECB member chatter would support a breakout session.

In the case of an extended rally, the bulls will likely test resistance at $1.05 but fall short of the Second Major Resistance Level (R2) at $1.0556. The Third Major Resistance Level (R3) sits at $1.0723.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0281 in play. However, barring another sell-off, the EUR/USD should avoid sub-$1.020. The Second Major Support Level (S2) at $1.0222 should limit the downside. However, dovish ECB member commentary and risk aversion could deliver a sharp pullback.

The third Major Support Level (S3) sits at $1.0055.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits at the 50-day EMA ($1.03416). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA moved away from the 200-day EMA, delivering mixed signals.

A hold above the 50-day EMA ($1.03416) would support a breakout from R1 ($1.0448) to target $1.05. However, a fall through the 50-day EMA ($1.03416) would bring S1 ($1.0281) into play. The 200-day EMA sits at $1.01360.

The US Session

It is a relatively busy day ahead, with housing sector data and consumer confidence in the spotlight. While the housing sector numbers will draw interest, the consumer confidence figures will likely have more influence on the dollar. A slide to sub-100 could test support for riskier assets.

FOMC member chatter will also need consideration through the US session.