EUR/USD Bulls to Target $1.05 on German Stats and ECB Chatter

It is a relatively busy day for the EUR/USD on the economic calendar. The German economy is back in the spotlight this morning, with finalized Q3 GDP and GfK Consumer Climate figures for December due.

Barring revisions to prelim GDP numbers, the consumer climate numbers will likely draw greater interest. Economists forecast a marginal improvement in confidence.

Thursday’s ECB monetary policy meeting minutes noted that “households were increasingly postponing major purchases and reducing their savings in order to maintain their consumption of basic necessities.”

ECB members also “argued that consumer confidence was likely to stay weak as long as inflation stayed high, as consumers had now lost a large part of previous gains in purchasing power.”

Despite this, the ECB noted that there was still excess savings from the COVID-19 pandemic and, coupled with fiscal support and labor market conditions, should drive consumption.

Considering the ECB’s views on consumer confidence, a sharp decline in confidence and spending could change the narrative. However, neither will likely immediately impact the ECB’s monetary policy goals, which should limit the lasting impact of the numbers on the EUR.

Following today’s stats, ECB member commentary will also need consideration. ECB members Luis de Guindos will speak today. On Thursday, ECB hawk Isabel Schnabel reportedly favored further aggressive policy moves to target inflation. According to Reuters, Schnabel said,

“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.”

Aligned with the ECB minutes, Schnabel noted that policy should remain data-dependent.

EUR/USD Price Action

At the time of writing, the EUR was down 0.02% to $1.04085. A bearish start to the day saw the EUR/USD fall to an early low of $1.04056 before steadying.

Technical Indicators

The EUR/USD needs to move through the $1.0414 pivot to target the First Major Resistance Level (R1) at $1.0446 and the Thursday high of $1.04485. Better-than-expected stats from Germany and hawkish ECB member chatter would support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0481 and resistance at $1.05. The Third Major Resistance Level (R3) sits at $1.0547.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0379 in play. However, barring another sell-off, the EUR/USD pair should avoid sub-$1.035 and the Second Major Support Level (S2) at $1.0347. However, dovish ECB member commentary could deliver a sharp pullback.

The third Major Support Level (S3) sits at $1.0280.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.03151). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA moving away from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.03151) would support a breakout from R1 ($1.0446) to target R2 ($1.0481) and $1.05. However, a fall through S1 ($1.0379) would bring S2 ($1.0347) and the 50-day EMA ($1.03151) into play. The 200-day EMA sits at $1.01041.

The US Session

There are no US economic indicators for the markets to consider, with the US markets on a half day for Thanksgiving.