EUR/USD Needs a Hawkish Lagarde and Weak US Consumption for $1.08

It is a relatively busy day ahead for the EUR/USD. Industrial production and trade data for the Eurozone will be in the spotlight.

Following better-than-expected survey-based data for December and January, today’s numbers could paint a different picture of the Eurozone economy. The forecasts are EUR/USD negative.

Economists forecast euro area industrial production to fall by 0.8%, reversing a 1% rise in November, and the trade deficit to widen from €11.7 billion to €12.5 billion.

Following an unexpected rise in German wholesale prices in January, weak economic indicators and signs of a pickup in inflationary pressure would be a bad combination for the ECB.

While there are plenty of stats to consider, investors need to monitor ECB member speeches. ECB President Christine Lagarde will speak today, with comments on inflation, the economic outlook, and monetary policy likely to influence ahead of tomorrow’s ECB Economic Bulletin.

EUR/USD Price Action

At the time of writing, the EUR/USD was down 0.02% to $1.07346. A mixed start to the day saw the EUR/USD rise to an early high of $1.07370 before falling to a low of $1.07323.

Technical Indicators

The EUR/USD needs to move through the $1.0749 pivot to target the First Major Resistance Level (R1) at $1.0792 and the Tuesday high of $1.08044. A return to $1.0750 would signal a bullish session. However, the EUR/USD would need ECB member chatter and today’s stats to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0847. The Third Major Resistance Level (R3) sits at $1.0945.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0694 in play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.0650. The Second Major Support Level (S2) at $1.0651 should limit the downside.

The third Major Support Level (S3) sits at $1.0554.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 200-day EMA ($1.07438). The 50-day EMA closed in on the 200-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 200-day EMA ($1.07438) and the 50-day ($1.07527) would give the bulls a run at the 100-day EMA ($1.07762) and R1 ($1.0792). A move through the 50-day EMA would send a bullish signal. However, failure to move through the 200-day EMA ($1.07438) would leave S1 ($1.0694) in view.

The US Session

It is a relatively busy day on the US economic calendar. Following the US CPI Report on Tuesday, manufacturing data, industrial production, and retail sales will draw interest.

We expect retail sales to have the most influence, however. Retail sales have fallen for two consecutive months. Another monthly fall could reignite fears of a US recession.

With retail sales in focus, investors also need to monitor FOMC member commentary. However, with no members on the calendar, investors need to track chatter with the media.