EUR/USD Needs Dovish FOMC Member Chatter for a Return to $1.07

It is another busy day ahead for the EUR/USD. Early in the European session, German trade data will draw interest. Recent survey-based data showed a slower pace of contraction in the private sector, supporting improved trade terms.

Economists forecast the German trade surplus to widen from €6.9 billion to €7.5 billion, driven by a rise in exports and a decline in imports. Better-than-expected numbers would deliver EUR/USD support.

Later in the European session, prelim inflation figures from Italy and Eurozone wholesale inflation figures will also influence. The markets are closely watching inflation. With France and Germany reporting softer inflation numbers, a similar trend in Italy and wholesale inflation would be another boost for the euro area economy.

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 up 0.07% to $1.06097. A range-bound start to the day saw the EUR/USD fall to an early low of $1.06005 before rising to a high of $1.06115.

Technical Indicators

The EUR/USD needs to avoid the $1.0592 pivot to target the First Major Resistance Level (R1) at $1.0645. A move through the Wednesday high of $1.06351 would signal a bullish session. However, the euro area and US economic indicators need to be EUR-friendly to support a bullish session as the focus shifts to the US jobs report.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0687 and resistance at $1.07. The Third Major Resistance Level (R3) sits at $1.0782.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0550 into play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.0450. The Second Major Support Level (S2) at $1.0498 should limit the downside.

The third Major Support Level (S3) sits at $1.0403.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 100-day EMA ($1.05994). The 50-day EMA moved away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A move through the 50-day EMA ($1.06216) would support a breakout from R1 ($1.0645) to target R2 ($1.0687) and $1.07. However, a fall through the 100-day EMA ($1.05994) would bring S1 ($1.0550) and sub-$1.05 into view.

The US Session

It is a busy day ahead on the economic calendar. ADP nonfarm employment change and weekly jobless claims will draw plenty of interest early in the US session. Later in the day, finalized Markit-survey service and composite PMIs will also influence. Revisions to the services PMI would have the most impact.

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. FOMC members Bostic and Bullard are slated to speak today.