EUR/USD Bulls to Target $1.11 on Euro Area Core Inflation

It is a busy day ahead for the EUR/USD. Ahead of the European opening bell, German retail sales figures will draw interest. While the numbers will influence the EUR/USD, manufacturing sector PMI numbers for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone will likely garner more interest.

After the disappointing euro area Q1 GDP numbers, weak manufacturing PMI numbers could question the ECB’s more optimistic economic outlook and policy goals.

However, with inflation as the focal point, prelim euro area inflation numbers for April will move the dial later in the day. Sticky inflation numbers would raise the bets on a 50-basis point interest rate hike on Thursday. Economists forecast Eurozone core inflation to hold steady at 5.7%.

With a busy economic calendar, investors should monitor ECB member commentary. ECB Executive Board member Andrea Enria is on the calendar to speak today. However, investors should also monitor the media for ECB comments.

EUR/USD Price Action

This morning, the EUR/USD was up 0.11% to $1.09854. A mixed start to the day saw the EUR/USD fall to an early low of $1.09672 before rising to a high of $1.09945.

Technical Indicators

Resistance & Support Levels

The EUR/USD needs to move through the $1.0991 pivot to target the First Major Resistance Level (R1) at $1.1018. A return to $1.10 would signal a bullish session. However, the EUR/USD needs the euro area and US 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 $1.1062. The Third Major Resistance Level (R3) sits at $1.1134.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0946 in play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.09. The Second Major Support Level (S2) at $1.0920 should limit the downside. The Third Major Support Level (S3) sits at $1.0848.

Looking at the EMAs and the 4-hourly chart, the EMAs sent mixed signals. The EUR/USD sits above the 100-day EMA ($1.09715). 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 ($1.09991) EMAs would support a breakout from R1 ($1.1018) to give the bulls a run at R2 ($1.1062). However, a fall through the 100-day EMA ($1.09715) would bring S1 ($1.0946) 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 busy day on the US economic calendar. The US JOLTs Job Openings and factory Orders will be in focus. We expect increased sensitivity to labor market stats ahead of the Fed interest rate decision.

Economists forecast job openings to fall from 9.913 million to 9.683 million. While the headline figure will influence, quit rates also need consideration. A sharp decline in the quit rate would signal deteriorating labor market conditions.

Away from the economic calendar, US corporate earnings and updates on First Republic Bank (FRC) will also influence market risk sentiment. Big names on the US earnings calendar include Pfizer Inc. (PFE), Starbucks Corp. (SBUX), and Ford Motor Co (F).