EUR/USD Faces Sub-$0.9550 on Hawkish Fed Chatter and Positive US Stats

It was a quiet start to the European session for the EUR. French unemployment figures will draw interest shortly.

However, the numbers are unlikely to have a material impact on the EUR/USD pair, with the markets holding out for ECB chatter later today.

From the ECB, ECB members Luis de Guindos and ECB President Christine Lagarde will deliver speeches today. Lagarde will draw the most interest, with the ECB President speaking on how central banks should address financial stability challenges related to the digitalization of financial services.

Any off-topic comments on inflation, economic outlook, and monetary policy will provide the EUR/USD pair with direction.

EUR/USD Price Action

At the time of writing, the EUR was up 0.12% to $0.96202.

A choppy start to the day saw the EUR/USD fall to an early low of $0.95840 before rising to a high of $0.96708.

Technical Indicators

The EUR/USD needs to move through the $0.9624 pivot to target the First Major Resistance Level (R1) at $0.9694 and the Monday high of $0.97093.

However, risk appetite will need to improve throughout the session to support a EUR/USD breakout from $0.97. In the case of a breakout session, the EUR would likely test the Second Major Resistance Level (R2) at $0.9780.

The Third Major Resistance Level (R3) sits at $0.9937.

Failure to move through the pivot would see the EUR/USD test the First Major Support Level (S1) at $0.9538. However, barring a market flight to safety, the EUR/USD pair should avoid sub-$0.9500 and the Second Major Support Level (S1) at $0.9467.

The Third Major Support Level (S3) sits at $0.9310.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 50-day EMA, currently at $0.98189. The 50-day EMA fell back from the 100-day EMA, with the 100-day EMA sliding back from the 200-day EMA, delivering bearish signals.

A EUR/USD move through R1 ($0.9694) and R2 ($0.9780) would give the bulls a run at the 50-day EMA ($0.98189). The 200-day EMA sits at $0.99858. However, failure to move through the 50-day EMA would leave the EUR/USD under pressure.

The US Session

It is a busy day ahead on the US economic calendar. Durable and core durable goods orders will draw interest before consumer confidence figures for September. Weak core durable goods orders would test support for riskier assets.

However, consumer confidence will have the most influence as the markets look for consumer response to the Fed’s rate hike and FOMC projections. Surging mortgage rates, higher interest rates amidst a gloomy economic backdrop, and the current inflation environment are likely concerns.

Labor market conditions remains a positive for consumers.

Economists forecast the CB Consumer Confidence Index to rise from 103.2 to 104.5 in September. Aside from the US economic indicators, FOMC members will also draw interest today. FOMC member Bullard will speak later today.

Monetary policy divergence and sentiment towards the global economic outlook support a DXY return to 115 near-term. Direction is unlikely to shift until a marked deterioration in US labor market conditions and a sharp slowdown in consumption.