EUR/USD Bulls to Target $1.07 on FOMC Projections and Powell Speech

Bob Mason
Updated: Dec 14, 2022, 07:18 GMT+00:00

It is another big day for the EUR/USD. Following Tuesday's breakout session, the focus shifts to the Fed, the economic projections, and Fed Chair Powell.

EUR/USD Tech Analysis - FX Empire

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It is a relatively busy day for the EUR/USD on the economic calendar. Early in the European session, finalized Spanish inflation numbers for November will draw interest ahead of Eurozone industrial production numbers for October.

Without revisions to the prelim Spanish inflation numbers, the Eurozone industrial production figures will likely have more influence.

However, while the stats will provide direction, the market focus will be on the Federal Reserve and today’s interest rate decision, the FOMC economic projections, and the Fed Chair Powell press conference.

Following the US CPI Report on Tuesday, the markets expect a 50-basis point rate hike. However, Tuesday’s CPI Report could adjust the interest rate path and the effects on the US and global economic outlook.

In contrast, today’s euro area numbers are unlikely to influence the ECB monetary policy decision and outlook.

From the ECB, Frank Elderson speaks today. However, with the ECB monetary policy decision tomorrow, Elderson may refrain from offering views on the economic outlook and policy intentions.

EUR/USD Price Action

At the time of writing, the EUR was up 0.01% to $1.06327. A mixed start to the day saw the EUR/USD fall to an early low of $1.06208 before rising to a high of $1.06390.

EUR/USD holds steady.
EURUSD 141222 Daily Chart

Technical Indicators

The EUR/USD needs to avoid the $1.0611 pivot to target the First Major Resistance Level (R1) at $1.0694. Risk-on sentiment and positive EUR/USD stats would support a bullish start to the day, though the Fed interest rate decision and FOMC projections will be the key driver.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0756. The Third Major Resistance Level (R3) sits at $1.0901.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0549 into play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.05 and the Second Major Support Level (S2) at $1.0466.

The third Major Support Level (S3) sits at $1.0321.

EUR/USD resistance levels in play above the pivot.
EURUSD 141222 1 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.05234). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.0549) and the 50-day EMA ($1.05234) would support a breakout from R1 ($1.0694) to target R2 ($1.0756). However, a fall through S1 ($1.0549) and the 50-day EMA ($1.05234) would bring S2 ($1.0466) into play. The 200-day EMA sits at $1.03164.

EMAs are bullish.
EURUSD 141222 4-Hourly Chart

The US Session

It is another big day ahead. The Federal Reserve delivers its final interest rate decision of the year.

Following the CPI Report, the markets expect a 50-basis point rate hike. Barring a surprise move, the FOMC economic projections and the Fed Chair Powell press conference will likely have the most influence.

A less hawkish outlook on interest rates, downward revisions to inflation forecasts, and a soft landing would support riskier assets and the EUR/USD.

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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