EUR/USD Firms Ahead of CPI Data, Lagarde Speech

The Euro is edging higher against the U.S. Dollar early Wednesday as traders look to follow yesterday’s strong surge with an even better performance with its March 17 main top standing in the way of a potential breakout to the upside.

The common currency received a boost on Tuesday on hopes of peace after it was heavily sold on fears of the economic fallout from war in Ukraine and nerves about the risk of the conflict spreading west.

At 05:18 GMT, the EUR/USD is trading 1.1109, up 0.0023 or +0.21%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $102.87, up $1.00 or +0.98%.

Traders Eyeing Peace Talks

According to Reuters, at the peace talks Russia promised to scale down military operations around Kyiv and Ukraine proposed adopting a neutral status in a sign of progress at face-to-face negotiations in Istanbul.

Despite the initial optimism, the single currency still faces some headwinds after U.S. officials poured a little cold water on hopes for a deal by warning the threat to Kyiv isn’t over.

Euro Zone Consumer Inflation on Tap; Lagarde Speaks

The recent weaker Euro theme has been fueled by the divergence in monetary policies between the hawkish U.S. Federal Reserve and the dovish European Central Bank (ECB). However, this relationship could change later today with the release of Euro Zone inflation data.

Major Euro Zone economies are due to report inflation figures from Wednesday, and “stronger-than-expected Euro Zone CPI will add to rates market pricing for ECB tightening, underpinning the Euro,” Barclays analysts said.

German Preliminary CPI is expected to come in a 1.6%. Meanwhile, ECB President Lagarde is also scheduled to speak at 08:00 GMT. It’s hard to predict the impact of the CPI data today because of the ongoing economic impact of the war in Ukraine.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.1137 will reaffirm the uptrend. A move through 1.0901 will change the minor trend to down.

The minor trend is also up. A trade through 1.0945 will change the minor trend to down. This will also shift momentum.

The EUR/USD is currently straddling a pivot at 1.1098.

On the upside, potential resistance is a series of 50% levels at 1.1151, 1.1207 and 1.1249. On the downside, the nearest support is a pair of 50% levels at 1.1019 and 1.0972.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Wednesday is likely to be determined by trader reaction to the pivot at 1.1098.

Bullish Scenario

A sustained move over 1.1098 will indicate the presence of buyers. Taking out the main top at 1.1137 will indicate the buying is getting stronger. This could lead to a labored rally with potential targets coming in at 1.1151, 1.1207 and 1.1249. The latter is a potential trigger point for an acceleration into 1.1389.

Bearish Scenario

A sustained move under 1.1098 will signal the presence of sellers. This could trigger a sharp break into 1.1019 and 1.0972. The latter is the last potential support before the minor bottom at 1.0945 and the main bottom at 1.0901.