EUR/USD to Target $1.01 on Eurozone Retail Sales and the US Mid-Terms

It is a relatively busy day for the EUR/USD on the economic calendar. French trade figures are due ahead of retail sales figures for Italy and the Eurozone. Barring dire trade data, the retail sales numbers for the Eurozone will likely draw the most interest.

The Eurozone numbers will indicate the impact of economic uncertainty, inflation, and ECB monetary policy on consumption.

On Monday, ECB President Lagarde reiterated that inflation was too high and that rates would rise to combat inflation and bring it to target. However, better-than-expected industrial production numbers from Germany and Eurozone investor confidence figures delivered the return to parity.

In Germany, industrial production increased by 0.6% in September, partially reversing a 1.2% slide from August, delivering some relief. Economists forecast a 0.2% rise. The Sentix Investor Confidence Index rose from -38.3 to -30.9, another positive for the EUR/USD amid bets of a Fed pivot.

Later today, ECB Members Luis de Guindos and Andrea Enria will speak. The markets will look for comments vis-a-vis the economic outlook, inflation, and ECB monetary policy.

EUR/USD Price Action

At the time of writing, the EUR was up 0.01% to $1.00193. A range-bound start to the day saw the EUR/USD fall to an early low of $1.00136 before rising to a high of $1.00194.

Technical Indicators

The EUR/USD needs to avoid the $0.9984 pivot to target the First Major Resistance Level (R1) at $1.0068. Hawkish ECB member chatter and upbeat Eurozone retail sales figures should support a breakout from the Monday high of $1.00345.

In the case of another extended rally, the bulls will likely take a run at the Second Major Resistance Level (R2) at $1.0119. The Third Major Resistance Level (R3) sits at $1.0253.

A fall through the pivot would bring the First Major Support Level (S1) at $0.9934 into play. In the case of an extended sell-off, the EUR/USD pair would likely test support at $0.99 but avoid the Second Major Support Level (S2) at $0.9850.

The third Major Support Level (S3) sits at $0.9715.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($0.98980). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA crossing through the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($0.98980) would support a breakout from R1 ($1.0068) to bring R2 ($1.0119) into view. However, a fall through S1 ($0.9934) and the 50-day EMA ($0.98980) would give the bears a run at the 100-day ($0.98792) and 200-day ($0.98791) EMAs.

The US Session

It is another quiet day ahead on the US economic calendar. There are no economic indicators to guide the Dollar Spot Index (DXY). The lack of stats will leave the focus on the US mid-term elections and FOMC member chatter.

While the bets of a December Fed pivot have gathered momentum, the FedWatch Tool has the probability of a 75-basis point rate hike at 50.4%. The numbers indicate uncertainty that should increase EUR/USD sensitivity to Fed commentary.