EUR/USD Price Forecast: Bulls Target $1.060 on ECB Policy Sentiment

It is a 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 remains an area of interest. ECB member McCaul is due to speak ahead of the afternoon session.

On Monday, ECB President Christine Lagarde highlighted the risk of a more material financial market correction.

Lagarde said,

“While the correction in asset prices has so far been orderly, the risk of a further and possibly abrupt fall in asset prices remains severe.”

Lagarde added,

“In particular, current equity valuations seem to reflect two assumptions:

1. Despite the negative growth impact of the war in Ukraine, growth rates in the major advanced economies will remain in positive territory.
2. Central banks will be able to gradually reduce inflation rates to their targets as currently expected by markets.

Lagarde concluded,

“However, a materialization of tail-risk scenarios – for instance due to sustained further increase in energy prices – could imply that these assumptions do not hold.

The ECB President was talking in her capacity as the Chair of the European Systemic Risk Board.

Lagarde’s comments suggested a heightened degree of uncertainty over the inflation outlook. For the EUR, Lagarde hinted at the risk of a further spike in inflation that could force the ECB into more aggressive policy maneuvers to curb inflation.

EUR/USD Price Action

At the time of writing, the EUR was up 0.53% to $1.05657.

A bullish start to the day saw the EUR rise from an early low of $1.05062 to a high of $1.05686.

The EUR broke through the First Major Resistance Level at $1.0547.

Technical Indicators

The EUR will need to avoid the First Major Resistance Level and the $1.0509 pivot to retarget the Second Major Resistance Level at $1.0583 and resistance at $1.060.

Demand for riskier assets will need to remain to support a breakout from this morning’s high of $1.05686. Hawkish ECB chatter would support an extension of the morning trend.

An extended rally would test the Third Major Resistance Level at $1.0657.

A fall through the First Major Resistance Level and the pivot would bring the First Major Support Level at $1.0473 into play.

Barring an extended sell-off throughout the day, the EUR should avoid sub-$1.040. The Second Major Support Level at $1.0436 should limit the downside.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. The EUR at the 100-day EMA, currently at $1.05660.

The 50-day EMA narrowed to the 100-day EMA. The 100-day EMA eased back from the 200-day EMA, however, price negative.

A move through the 100-day EMA would support a run at the Third Major Resistance Level.

Next Up

FOMC member chatter will draw interest, with member Barkin due to speak. However, there are no stats from the US to influence the EUR after Monday’s holiday.