EUR/USD Return to $1.0050 and a Run at $1.0100 in Lagarde’s Hands

For the EUR, it was a quiet start to the day on the Eurozone economic calendar. German wholesale inflation figures drew interest ahead of the European session.

In August, the Producer Price Index increased by 7.9% versus 5.3% in July. Economists forecast a 1.6% rise. Year-over-year, the index was up 45.8% versus 37.2% in July. Economists forecast a 37.1% increase year-over-year.

According to Destatis,

• Both were the highest ever increases.
• Energy prices were the main contributor compared with August 2021 (+139%).
• There were also marked price increases for intermediate goods (+17.5%) and capital goods (+7.8%) and durable (10.9%) and non-durable consumer goods (+16.9%).

Following today’s wholesale inflation numbers, the market focus will return to ECB member chatter. Later today, ECB member Elizabeth McCaul will speak ahead of ECB President Lagarde.

EUR/USD Price Action

At the time of writing, the EUR was down 0.10% to $1.00122. A mixed morning saw the EUR/USD rise to an early high of $1.00506 before falling to a low of $1.00002.

Technical Indicators

The EUR/USD needs to avoid the $1.0006 pivot to target the First Major Resistance Level (R1) at $1.0046.

With no economic indicators to provide direction later in the day, hawkish ECB President Lagarde comments would support a breakout. In the event of an extended rally, the EUR would likely test the Second Major Resistance Level (R2) at $1.0069 and resistance at $1.0100. The Third Major Resistance Level (R3) sits at $1.0133.

Failure to move through the pivot would see the EUR/USD test the First Major Support Level (S1) at $0.9982.

However, barring a market flight to safety, the EUR/USD pair should avoid sub-$0.99. The Second Major Support Level (S2) at $0.9942 should limit the downside. The Third Major Support Level (S3) sits at $0.9879.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 50-day EMA, currently at $1.00086. The 50-day EMA eased back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals.

A EUR/USD move through the 50-day EMA ($1.00086), and the 100-day EMA ($1.00168) would support a run at R1 ($1.0046) and the 200-day EMA ($1.00626). However, failure to move through the 50-day EMA would leave the Major Support Levels into play.

The US Session

It is a relatively quiet US economic calendar. Going into the US session, housing sector numbers for August will draw interest. Following the return of mortgage rates to 6% for the first time since 2008, weak numbers could cause concern over the housing sector outlook.

Late in the session, the Redbook will also be in focus, though neither will likely influence the Fed.

There are no FOMC member speeches to consider, with the FOMC in its September blackout period (September 10-22).

This morning, the split between a September 75-basis point and a percentage point rate hike was 80% to 20% in favor of a 75-basis point hike.

For November, the split sits at 63.4% to 14.5% in favor of a 75-basis point move. The chance of a 50-basis point hike is 22.2%.