EUR/USD Price Forecast: Return to $1.055 to Bring $1.06 into Play

Following the disappointing private sector PMIs on Thursday, which weighed on the EUR/USD, the focus returned to the German economy this morning.

Eurozone economic data on the economic calendar included Germany’s Ifo Business Climate Index and sub-components.

The markets have been forgiving of weak Ifo numbers in recent months, China’s lockdown measures, and the war in Ukraine a drag.

However, this morning’s figures were of more interest, with the markets looking to assess the impact of the ECB’s shift in monetary policy on business sentiment.

For the EUR, central bank chatter and the EU Leaders Summit will also draw interest later this morning.

ECB members McCaul and De Guindos are due to speak. The prelim June private sector PMI numbers highlighted persistent inflationary pressure and sliding demand, which could test the ECB’s stance on monetary policy.

German Ifo Business Climate Index Weighs on the EUR

Germany’s Ifo Business Climate Index fell from 93.0 to 92.3 in June. Economists forecast a more modest decline to 92.9.

Business sentiment towards current conditions held steady while expectations waned. The Current Assessment sub-index slipped from 99.6 to 99.3, with the Business Expectations Index falling from 86.9 to 85.8. Economists forecast values of 99.1 and 87.4, respectively.

EUR/USD Price Action

At the time of writing, the EUR was up 0.05% to $1.05229.

This morning, the EUR rose from an early low of $1.05119 to an early high of $1.05467 before easing back.

Germany’s business sentiment figures led to a pullback to $1.052 levels.

The EUR left the Major Support and Resistance Levels untested early on.

Technical Indicators

The EUR/USD will need to move through the $1.0527 pivot to target the First Major Resistance Level at $1.0571 and Thursday’s high of $1.0581.

Demand for riskier assets will need to improve to support a breakout from $1.0550.

An extended rally would test resistance at $1.060 and the Second Major Resistance Level at $1.0625. The Third Major Resistance Level sits at $1.0724.

Failure to move through 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-$1.045 and the Second Major Support Level at $1.0429.

The Third Major Support Level sits at $1.0330.

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 $1.05289.

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

Failure to move back through the 50-day EMA would bring sub-$1.050 and the Major Support levels into play.

The US Session

On monetary policy, FOMC member Bullard is due to speak early in the European session. Following Fed Chair Powell’s two days of testimony, the markets will be looking for any deviation from the Powell script.

Economic data from the US is limited to finalized Michigan Consumer Sentiment figures that should have a muted impact on the EUR/USD.