EUR/USD Bulls to Target $1.0850 on ECB and Fed Sentiment

It is a quiet day ahead for the EUR/USD. There are no economic indicators from the euro area for investors to consider today.

The lack of stats will leave the EUR/USD in the hands of investor sentiment toward monetary policy. This week, ECB President Lagarde spoke about tightening monetary policy further to bring inflation to target. The ECB President warned that market turbulence would not hinder the ECB’s efforts to bring inflation to target.

Lagarde pointed out that prevailing market conditions could help the ECB in its inflation commitments, saying,

“Clearly financial stability tensions might have an impact on demand and might actually do part of the work that would otherwise be done by monetary policy and interest rate hikes.”

However, the ECB President warned that further rate hikes were needed. The hawkish chatter and an unwavering commitment to tackling inflation gave the EUR/USD a look at $1.08 early this week.

With no stats to consider and monetary policy in focus, investors should also monitor ECB member speeches. ECB President Lagarde and ECB Chief Economist Philip Lane speak today.

While we expect sensitivity to ECB commentary, investor reaction to hawkish chatter could be cagey with the Fed in focus this afternoon.

EUR/USD Price Action

This morning, the EUR/USD was up 0.03% to $1.07862. A mixed start to the day saw the EUR/USD rise to an early high of $1.07768 before easing back.

Technical Indicators

The EUR/USD needs to avoid the $1.0753 pivot to target the First Major Resistance Level (R1) at $1.0801. A move through the Tuesday high of $1.07886 would signal a bullish session. However, the EUR/USD would need hawkish ECB chatter and a dovish Fed to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0837 and resistance at $1.0850. The Third Major Resistance Level (R3) sits at $1.0922.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0717 into play. However, barring a Fed-fueled sell-off, the EUR/USD pair should avoid sub-$1.065. The Second Major Support Level (S2) at $1.0668 should limit the downside. The Third Major Support Level (S3) sits at $1.0583.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The EUR/USD sits above the 50-day EMA ($1.06789). The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.0717) and the 50-day EMA ($1.06789) would support a breakout from R1 ($1.0801) to give the bulls a run at R2 ($1.0837) and $1.0850. However, a fall through the S1 ($1.0717) and the 50-day EMA ($1.06789) would bring S2 ($1.0668) into play. A fall through the 50-day EMA would send a bearish signal.

The US Session

Looking ahead to the US session, it is a quiet day on the US economic calendar. There are no US economic indicators for investors to consider. The lack of economic indicators will leave the market focused on the Federal Reserve.

The banking crisis took a 50-basis point Fed rate hike off the table. However, there is uncertainty over whether the Fed will pause or push beyond the previously projected 5.1% peak.

There are no FOMC member speeches to consider. The Fed is in a blackout period, leaving investors to respond to the Fed policy decision, FOMC projections, and Fed Chair Powell.