EUR/USD Faces a Choppy Day with the FOMC Meeting Minutes in Focus

It is a busy day ahead for the EUR/USD. Early in the European session, French prelim inflation and consumer confidence figures will draw interest. Following the softer inflation numbers from Germany, the EUR/USD could be in for another pullback should French inflation come in softer-than-expected.

Later in the session, service and composite PMI numbers for member states and the Eurozone will also provide direction. While the headline numbers will influence, we expect inflation, new orders, and employment sub-components to impact the EUR/USD.

Softer inflation, weaker new orders, and falling employment levels could force the ECB to rethink its policy goals.

No ECB members are speaking today, leaving investors to consider the impact of today’s stats on ECB monetary policy.

EUR/USD Price Action

At the time of writing, the EUR was flat at $1.05472. A range-bound start to the day saw the EUR/USD fall to an early low of $1.05452 before rising to a high of $1.05484.

Technical Indicators

The EUR/USD needs to move through the $1.0583 pivot to target the First Major Resistance Level (R1) at $1.0647 and the Tuesday high of $1.06831. A return to $1.060 would signal a bullish session. However, any major breakout may be on hold until the FOMC meeting minutes.

In the case of an extended rally, the bulls will likely test resistance at $1.07 but fall short of the Second Major Resistance Level (R2) at $1.0747. The Third Major Resistance Level (R3) sits at $1.0910.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0483 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.04. The Second Major Support Level (S2) at $1.0419 should limit the downside.

The third Major Support Level (S3) sits at $1.0256.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 100-day EMA ($1.05987). The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 100-day EMA ($1.05987) would support a run at the 50-day EMA (1.06261) and R1 ($1.0647). A breakout from the 50-day EMA would send a bullish signal. However, a fall through the 200-day EMA ($1.04996) and S1 ($1.0483) would bring S2 ($1.0419) into view.

The US Session

It is a busy day ahead on the economic calendar, with the ISM Manufacturing PMI for December and JOLTs job openings for November in focus. While we expect market sensitivity to both reports, the JOLTs job openings could have more influence ahead of the Friday jobs report.

However, the FOMC meeting minutes should have more impact late in the session. The markets expect hawkish minutes that delivered the dollar breakout on Tuesday.

Investors should also look out for any FOMC member commentary. Following the holidays, the markets are looking for a response to the latest round of economic indicators.