EUR/USD Target Remains $1.0950 with Private Sector PMIs in Focus
It is a busy day ahead for the EUR/USD. Early in the European session, German consumer confidence figures for February will draw interest. Softer inflation, a steady labor market, and expectations of a short-lived and shallow recession support a continued improvement in confidence.
On Monday, the Eurozone consumer confidence indicator rose from -22.0 to -20.9. Economists expect a similar trend for Germany, forecasting the GfK Consumer Climate Index to rose from -37.8 to -33.0.
However, while the numbers will draw interest, prelim January private sector PMI numbers for France, Germany, and the Eurozone will have the most influence. While forecasts are for a modest rise in the PMIs, economists forecast the euro area private sector to continue contracting in January.
Economists forecast the German composite PMI to rise from 49.0 to 49.6 and the euro area composite PMI to increase from 49.3 to 49.8. Better-than-expected numbers and a return to growth should deliver a EUR/USD boost.
Following today’s stats, ECB President Lagarde will also draw interest. Lagarde will speak via video at a roundtable, ‘the euro as a guarantee of resilience.’ However, Lagarde would need to deviate from recent forward guidance to move the dial.
EUR/USD Price Action
At the time of writing, the EUR was up 0.04% to $1.08725. A range-bound start to the day saw the EUR/USD rise from an early low of $1.08682 to a high of $1.08725.
The EUR/USD needs to move through the $1.0880 pivot to target the First Major Resistance Level (R1) at $1.0915 and the Monday high of $1.09267. A return to $1.09 would signal an extended rally. However, the EUR/USD would need better-than-expected PMI numbers and hawkish ECB commentary to support a breakout.
In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0961. The Third Major Resistance Level (R3) sits at $1.1042.
Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0834 in play. However, barring a data-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.08 and the Second Major Support Level (S2) at $1.0799.
The third Major Support Level (S3) sits at $1.0719.
Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.08140). The 50-day EMA pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.
A hold above S1 ($1.0834) and the 50-day EMA ($1.08140) would support a breakout from R1 ($1.0915) to target R2 ($1.0961). However, a fall through S1 ($1.0834) and the 50-day EMA ($1.08140) would bring S2 ($1.0799) into play. A fall through the 50-day EMA would signal a shift in sentiment.
The US Session
It is a busier day ahead on the US economic calendar. Prelim January private sector PMI numbers will be in the spotlight. Following the disappointing ISM survey-based numbers for December, a deeper contraction in the services sector would give further evidence of a hard landing.
There are also FOMC members speaking today to influence, with the Fed having entered the blackout period on Saturday.