EUR/USD Shifts Focus to the FOMC Minutes with Sub-$1.06 in View

It was another busy morning for the EUR/USD. On the economic data front, finalized January German and Italian inflation figures drew interest. However, the German Business Ifo Climate Index was the key stat of the morning.

In February, the German private sector returned to growth according to prelim PMI numbers, thanks to a sharp pickup in service sector activity. The Business Climate Index needed to reflect improving business conditions.

However, an unexpected fall in the German Current Assessment Index left the Business Climate Index short of forecasts.

The German Ifo Business Climate Index increased from 90.1 to 91.1 in February. Economists forecast an increase to 91.2. The Current Assessment Index fell from 94.1 to 93.9, while the Business Expectations Index climbed from 86.4 to 88.5. Economists forecast increases to 95.0 and 88.3, respectively.

Today’s figures led to a EUR/USD reversal. However, the stats will unlikely influence the ECB’s March policy decision.

Inflation figures from Italy and Germany had a muted impact on the EUR. While inflationary pressures picked up in German, inflation softened in Italy, though inflation remained elevated.

After the latest PMI numbers and today’s stats, investors need to monitor ECB member speeches. However, with no Executive board members on the calendar to speak, commentary with the media will need consideration. ECB members will need to discuss post-March moves to draw interest.

EUR/USD Price Action

At the time of writing, the EUR/USD was down 0.17% to $1.06255. A mixed morning saw the EUR/USD rise to a high of $1.06640 before falling to a low of $1.06245.

Technical Indicators

The EUR/USD needs to move through the $1.0660 pivot to target the First Major Resistance Level (R1) at $1.0682 and the Tuesday high of $1.06983. A return to $1.0680 would signal a bullish session. However, the EUR/USD would need today’s stats and the Fed minutes to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0721. The Third Major Resistance Level (R3) sits at $1.0782.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0621 in play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.0550. The Second Major Support Level (S2) at $1.0599 should limit the downside. The Third Major Support Level (S3) sits at $1.0538.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 50-day EMA ($1.06905). Following the bearish cross on Wednesday, the 50-day EMA pulled further back from the 200-day EMA, with the 100-day EMA closing in on the 200-day EMA, delivering bearish signals.

A move through R1 ($1.0682) and the 50-day EMA ($1.06905) would give the bulls a run at R2 ($1.0721) and the 200-day EMA ($1.07236). A move through the 50-day EMA would send a bullish signal. However, failure to move through the 50-day EMA ($1.06905) would leave the Major Support Levels in play.

The US Session

It is a relatively quiet day on the US economic calendar. There are no US economic indicators for investors to consider today. The lack of stats will leave the Fed in the spotlight. Late in the US session, the FOMC meeting minutes will draw plenty of interest.

Following the latest round of US economic indicators and hawkish Fed chatter, the markets will dissect the minutes to gauge how far the Fed is willing to go. FOMC member chatter will also influence the dollar, with FOMC member Williams speaking late in the session.