EUR/USD Faces Risk of Sub-$1.03 on German Wholesale Inflation Numbers

It is a quiet day for the EUR/USD on the economic calendar. German wholesale inflation figures for October will draw attention.

With little else for the markets to consider and the continued focus on inflation, a pickup in wholesale inflationary pressure would deliver EUR/USD support.

However, hawkish ECB chatter has failed to send the EUR back toward $1.05. Economic growth forecasts and the war in Ukraine continue to question the ECB’s options to tackle inflation.

Today, ECB member Edouard Fernandez-Bollo will speak. On Friday, the ECB President stuck to the script, reassuring the markets that the ECB will,

“Raise rates further, and withdrawing accommodation may not be enough.”

However, there were conflicting messages on Friday, with ECB member Knot stating,

“As the stance of monetary policy tightens further, it will become more likely that the pace of increases will slow.”

EUR/USD Price Action

At the time of writing, the EUR was up 0.04% to $1.03277. A mixed start to the day saw the EUR/USD fall to an early low of $1.03218 before finding support.

Technical Indicators

The EUR/USD needs to move through the $1.0344 pivot to target the First Major Resistance Level (R1) at $1.0375 and the Friday high of $1.0396. German wholesale inflation and ECB member chatter need to support a breakout from $1.0350.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0427. The Third Major Resistance Level (R3) sits at $1.0509.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0292 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid the Second Major Support Level (S2) at $1.0262.

The third Major Support Level (S3) sits at $1.0179.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.02665). The 50-day EMA widened from the 100-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals.

A hold above the S1 ($1.0292) and the 50-day EMA ($1.02665 would support a breakout from R1 ($1.0375) to bring $1.04 into play. However, a fall through S1 ($1.0292) would give the bears a run at the 50-day EMA ($1.02665) and S2 ($1.0262). The 200-day EMA sits at $1.00425.

The US Session

It is a quiet day ahead on the US economic calendar, with the Chicago Fed National Activity Index number the key stat of the day. However, the numbers are unlikely to influence the Fed or market risk sentiment.

Following last week’s hawkish Fed chatter, uncertainty over a December Fed pivot could deliver further dollar support.

The probability of a 75-basis point December rate hike had fallen to 14.6% before rising to 24.2% over the weekend. This morning, the likelihood of a 75-basis point rate hike stood at 24.2%, according to the FedWatch Tool.

While the US economic calendar shows no FOMC members speaking today, comments to the media need consideration. US unemployment and inflation support further front-loading. Hawkish Fed chatter would place further pressure on the EUR/USD.