EUR/USD Price Forecast: $1.045 to Bring sub-$1.040 into Play

It is yet another quiet day on the Eurozone economic calendar, with no material stats due out of the Eurozone to provide the EUR with direction.

While there are no stats for the markets to consider, central bank chatter remained an area of interest. ECB members De Guindos and Elderson spoke this morning.

With the markets now expecting the ECB to take a more aggressive line on curbing inflation, there were no comments to grab the headlines.

The lack of influence leaves Fed Chair Powell testimony on Capitol Hill as the main event.

EUR/USD Price Action

At the time of writing, the EUR was down 0.30% to $1.04989.

A bearish start to the day saw the EUR slide to a morning low of $1.04686.

The EUR fell the First Major Support Level at $1.04970 before finding support.

Technical Indicators

The EUR will need to move through the $1.0540 pivot to target the First Major Resistance Level at $1.0573 and the Tuesday high of $1.05824.

Demand for riskier assets will need to rebound to support a return to $1.50 levels.

An extended rally would test the Second Major Resistance Level at $1.0616.

Failure to move through the pivot would bring the First Major Support Level at $1.0497 back into play.

Barring an extended sell-off throughout the day, the EUR should avoid sub-$1.045.

The Second Major Support Level at $1.0464 should limit the downside.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal.

This morning, EUR sat below the 50-day EMA, currently at $1.05263.

The 50-day EMA eased back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, price negative.

A move through the 50-day EMA would bring the Major Resistance Levels into play.

Next Up

Later today, Fed Chair Powell testimony on Capitol Hill will be the key driver of the day.

FX Empire Senior Editorial Team Member James Hyerczyk had this to say,

“Powell said last week that restoring price stability is “unconditional”.  We already know where the Fed stands, but the market isn’t sure if Powell has the support of both Democrats and Republicans so Wednesday’s testimony may turn political.

He may get hammered by both sides as to how he is going to achieve price stability (ie lower inflation) without disrupting labor market growth or causing a recession. “

James added,

“He may even be asked directly what the chances are for a recession. I think comments on labor market growth and the odds of a recession will grab the headlines. I don’t think reiterating that the Fed will raise rates aggressively will move the market much.

Powell also has a dual mandate:  2% inflation and 5% unemployment. He’s going to be asked how he can pull that off without causing economic damage.  If he says the Fed is willing to accept some economic damage, they are probably going to ask him where, what sector of the economy, and how much.“

James concluded,

“I’m leaning toward a round of intense questioning. If they ask him softball questions then I think the market will be disappointed.”