EUR/USD to Target $1.06 on Softer US Wholesale Inflation Numbers

It is a quiet day for the EUR/USD on the economic calendar. Early in the European session, French nonfarm payroll figures are due. However, barring a sharp decline, the numbers are unlikely to have a material impact on the EUR.

With the ECB focused on growth and inflation, labor market conditions would have to deteriorate materially to influence policy intentions.

While there are no stats from the Eurozone to provide the EUR/USD with direction, economic data from China and the US will draw plenty of interest.

November inflation figures from China will set the tone. Economists forecast China’s annual inflation rate to soften from 2.1% to 1.6%. Softer inflationary pressures would pass through to the euro areas, which could translate into lower inflation projections for the ECB’s December policy decision.

With inflation the hot topic amidst fears of a global economic recession, ECB member chatter will also provide direction. ECB members Andera Enria and Elizabeth McCaul will speak today. Following the latest Q3 GDP numbers for the Eurozone, hawkish ECB member chatter would provide EUR/USD support.

EUR/USD Price Action

At the time of writing, the EUR was down 0.01% to $1.05540. A mixed start to the day saw the EUR/USD fall to a low of $1.05528 before steadying.

Technical Indicators

The EUR/USD needs to avoid the $1.0536 pivot to target the First Major Resistance Level (R1) at $1.0583. ECB chatter would have to be hawkish to support a breakout from the Thursday high of $1.05649.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0612. The Third Major Resistance Level (R3) sits at $1.0687. A return to $1.06 would likely hinge on softer US wholesale inflation figures.

A EUR/USD fall through the pivot would bring the First Major Support Level (S1) at $1.0508 into play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.0480 and the Second Major Support Level (S2) at $1.0461.

The third Major Support Level (S3) sits at $1.0386.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.04741). 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 S1 ($1.0508) and the 50-day EMA ($1.04741) would support a EUR/USD breakout from R1 ($1.0583) to target R2 ($1.0612). However, a fall through S1 ($1.0508) and the 50-day EMA ($1.04741) would bring S2 ($1.0461) into play. The 200-day EMA sits at $1.02671.

The US Session

It is a busy session, with wholesale inflation and consumer sentiment figures in focus. While we have seen increased sensitivity to the consumer sentiment report, wholesale inflation figures should garner more interest.

With the Fed delivering its final policy decision of the year on Wednesday and the November CPI report on Tuesday, a better-than-expected annual wholesale rate of inflation figure could raise more question marks over a Fed pivot. Economists forecast the US wholesale inflation rate to soften from 8.0% to 7.2%.

No FOMC members will speak today. The Fed entered the blackout period last Sunday.