EUR/USD Set for a Choppy Session with GDP and Inflation in Focus

It is a busy day ahead for the EUR/USD. Prelim inflation numbers for France and Germany and GDP figures for France, Germany, and the Eurozone will be in focus.

With the ECB in action next week and a 50-basis point interest rate hike on the table, today’s numbers will garner plenty of interest ahead of Eurozone inflation numbers next week.

A pickup in economic activity across the member states and sticky core inflation could trigger a more hawkish ECB monetary policy response.

Other stats include French consumer spending and German unemployment figures. However, these should have a limited impact on the EUR/USD considering the main stats of the day.

With inflation and GDP numbers in focus, ECB member chatter will move the dial. ECB President Christine Lagarde is on the calendar to speak today. Lagarde will participate in an informal ECOFIN meeting with Mr. Panetta.

Comments relating to the euro area CPI report and ECB monetary policy will move the dial.

On Monday, ECB Executive Board member Isabel Schnabel said that a 50-basis point interest rate hike remains on the table.

EUR/USD Price Action

This morning, the EUR/USD was down 0.10% to $1.10164. A mixed start to the day saw the EUR/USD rise to an early high of $1.10395 before falling to a low of $1.10124.

Technical Indicators

Resistance & Support Levels

The EUR/USD needs to move through the $1.1028 pivot to target the First Major Resistance Level (R1) at $1.1063 and the Thursday high of $1.10634. A return to $1.1050 would signal a bullish session. However, the EUR/USD needs hawkish ECB chatter and euro area economic indicators to support a pre-US session breakout.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.1099. The Third Major Resistance Level (R3) sits at $1.1171.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0992 in play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.0950. The Second Major Support Level (S2) at $1.0956 should limit the downside. The Third Major Support Level (S3) sits at $1.0885.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The EUR/USD sits above the 50-day EMA ($1.10013). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.10013) would support a breakout from R1 ($1.1063) to give the bulls a run at R2 ($1.1099). However, a fall through the 50-day EMA ($1.10013) and S1 ($1.0992) would bring the 100-day EMA ($1.09647) and S2 ($1.0956) into view. A fall through the 50-day EMA would send a bearish signal.

The US Session

Looking ahead to the US session, it is a busy day on the US economic calendar. The all-important Core PCE Price Index numbers and personal income and spending figures will influence.

This morning, the probability of a 25-basis point Fed interest rate hike in May stood at 87.4%, up from 72.2% on Thursday, according to the CME FedWatch Tool. Hotter-than-expected inflation figures and a pickup in income and spending could fuel the bets on another hike in June. There is a 24.8% chance of a 25-basis point June interest rate hike, up from 13.7% on Thursday.

Away from the economic calendar, US corporate earnings will also influence market risk sentiment. Big names on the US earnings calendar include Exxon Mobile (XOM) and Chevron (CVX).