EUR/USD Bulls to Target $1.0680 on German Business Sentiment Survey

It is a relatively quiet day for the EUR/USD on the economic calendar. The German economy will be in the spotlight, with business sentiment figures for December in focus. Following the prelim December private sector PMI numbers, the markets will look for a pickup in business confidence.

According to the December Composite PMI survey, sentiment improved across the private sector, turning positive at the end of the year.

Economists forecast the German Ifo Business Climate Index to rise from 86.3 to 87.4, supported by a more marked pickup in the German Business Expectations Index. Economists forecast an increase from 80.0 to 82.0 while forecasting the Current Assessment Index to rise from 93.1 to 93.5.

However, with inflation, a key consideration for the ECB, euro area wage growth and labor cost figures for Q3 will also draw interest.

On Thursday, the ECB upwardly revised inflation from 5.5% to 6.3%. A pickup in wage growth and labor costs would support the ECB outlook.

Following Thursday’s monetary policy decision and projections, the markets need to consider ECB chatter. ECB members Luis de Guindos speaks today.

EUR/USD Price Action

At the time of writing, the EUR was up 0.16% to $1.06012. A mixed morning saw the EUR/USD fall to an early low of $1.05821 before rising to a high of $1.06041.

Technical Indicators

The EUR/USD needs to move through the $1.0611 pivot to target the First Major Resistance Level (R1) at $1.0637 and the Friday high of $1.06631. Better-than-expected economic indicators would support a bullish session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0689. The Third Major Resistance Level (R3) sits at $1.0768.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0558 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.05. The Second Major Support Level (S2) at $1.0532 should limit the downside.

The third Major Support Level (S3) sits at $1.0453.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.05783). The 50-day EMA moved away from the 100-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.05783) would support a breakout from R1 ($1.0637) to target R2 ($1.0689). However, a fall through the 50-day EMA ($1.05783) and S1 ($1.0558) would bring S2 ($1.0532) into view. The 200-day EMA sits at $1.03686.

The US Session

It is a quiet day ahead for the dollar. House price figures for December will be in focus. With recession fears resurfacing and mortgage rates elevated, a fall in the NAHB Housing Market Index could weigh on riskier assets.

Falling house prices would put the sector under more pressure to dampen consumer confidence, which could further fuel fears of a recession.

Following last week’s hawkish Fed interest rate hike, investors will need to monitor FOMC member chatter. Last week, US economic indicators and the FOMC interest rate projections delivered uncertainty.