EUR/USD Bulls to Target $1.08 on Favorable Debt Ceiling Vote

It is a busy day ahead for the EUR/USD. The French economy is in focus early in the European session. Consumer spending, Q1 GDP, and prelim inflation numbers for May will move the dial. We expect the GDP and inflation numbers to have more impact.

Weaker-than-expected growth in Q1 and a pickup in inflationary pressure would question how far the ECB is willing to go to tame inflation.

German unemployment figures will also draw interest ahead of prelim German inflation figures out later. We expect the inflation numbers to garner more interest. Economists forecast Germany’s annual inflation rate to accelerate from 7.2% to 7.3% in May.

With inflation numbers in focus, investors should monitor central bank commentary. ECB President Christine Lagarde is on the calendar to speak today. However, ahead of the European session, economic data from China set the tone.

NBS Manufacturing and Non-Manufacturing PMI figures for May gave investors a better view of the macroeconomic environment midway through the second quarter.

The NBS Manufacturing PMI declined from 49.2 to 48.8, with the Non-Manufacturing PMI falling from 56.4 to 54.5. Economists forecast the NBS Manufacturing PMI to rise from 49.2 to 49.4 and the Non-Manufacturing PMI to fall from 56.4 to 55.0.

The NBS numbers are a precursor to the Caixin Manufacturing PMI numbers that will have more impact on riskier assets.

EUR/USD Price Action

This morning, the EUR/USD was down 0.24% to $1.07082. A mixed start to the day saw the EUR/USD rise to an early high of $1.07357 before falling to a low of $1.07074.

Technical Indicators

Resistance & Support Levels

The EUR/USD has to move through the $1.0718 pivot to target the First Major Resistance Level (R1) at $1.0763 and the Tuesday high of $1.07466. A return to $1.0750 would signal a bullish session. However, the EUR/USD needs the debt ceiling news and economic indicators to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0792 and resistance at $1.08. The Third Major Resistance Level (R3) sits at $1.0866.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0689 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.0650 and the Second Major Support Level (S2) at $1.0644. The Third Major Support Level (S3) sits at $1.0569.

Looking at the EMAs and the 4-hourly chart, the EMAs sent bearish signals. The EUR/USD sits below the 50-day EMA ($1.07589). The 50-day EMA fell back from the 200-day EMA, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.

A move through the 50-day EMA ($1.07589) and R1 ($1.0763) would give the bulls a run at R2 ($1.0792) and $1.08. However, failure to move through the 50-day EMA ($1.07589) would leave S1 ($1.0689) in view. A move through the 50-day EMA would send a bullish signal.

The US Session

Looking ahead to the US session, it is a relatively busy day on the US economic calendar.

JOLTs job openings will be the main report as investors prepare for Friday’s US Jobs Report. While the headline figure will influence, investors should consider quit rates. A pickup in quit rates would signal employee confidence in US labor market conditions.

However, FOMC members will also need consideration. FOMC members Harker and Bowman are on the calendar to speak today.

While the numbers and Fed commentary will influence, investors should monitor US debt ceiling-related news. Lawmakers could vote on the deal later today.