EUR/USD Bulls to Target $1.1050 on ECB Monetary Policy Outlook

It is a relatively quiet day ahead for the EUR/USD. German consumer sentiment figures will be in focus this morning.

With inflation a central bank bugbear, lackluster consumer spending would weigh on the outlook for euro area economic growth and the EUR/USD.

Economists forecast the GfK German Consumer Climate Indicator to rise from -29.5 to -27.9 in May. While weaker-than-expected numbers would weigh on the EUR/USD, they are unlikely to dictate the next ECB interest rate decision, with core inflation the focal point.

With investors focused on inflation and central banks, ECB member chatter will move the dial. ECB Executive Board members Andrea Enria, Luis de Guindos, and Anneli Tuominen are on the calendar to speak today.

Comments relating to the euro area CPI report and ECB monetary policy will move the dial.

On Monday, ECB Executive Board member Isabel Schnabel said that a 50-basis point interest rate hike remains on the table.

EUR/USD Price Action

This morning, the EUR/USD was up 0.03% to $1.09757. A mixed start to the day saw the EUR/USD rise to an early high of $1.09803 before falling to a low of $1.09666.

Technical Indicators

Resistance & Support Levels

The EUR/USD needs to move through the $1.1001 pivot to target the First Major Resistance Level (R1) at $1.1038. A return to $1.10 would signal a bullish session. However, the EUR/USD needs hawkish ECB chatter and a pickup in German consumer confidence to support a pre-US session breakout.

In the case of an extended rally, the bulls will likely test resistance at the Tuesday high of $1.1067 but fall short of the Second Major Resistance Level (R2) at $1.1104. The Third Major Resistance Level (R3) sits at $1.1207.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0935 in play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.09 and the Second Major Support Level (S2) at $1.0898. The Third Major Support Level (S3) sits at $1.795.

Looking at the EMAs and the 4-hourly chart, the EMAs send mixed signals. The EUR/USD sits above the 100-day EMA ($1.09457). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA widened from the 200-day EMA, delivering mixed signals.

A move through the 50-day EMA ($1.09810) would support a breakout from R1 ($1.1038) to give the bulls a run at the Tuesday high of $1.1067. However, a fall through the 100-day EMA ($1.09457) and S1 ($1.0935) would bring S2 ($1.0898) into 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 busier day on the US economic calendar. US core durable goods orders and goods trade data will draw interest. However, we expect the core durable goods orders to garner greater interest.

Recent manufacturing sector economic indicators have disappointed. A larger-than-expected fall in core durable goods orders would further fuel recessionary fears.

After the market reaction to the earnings on Tuesday and banking sector-related news, we expect corporate earnings and banking sector updates to draw interest.

There is no Fed commentary to influence market sentiment with the Fed in the blackout period.