EUR/USD to Target $1.09 on Easing Bank Jitters and ECB Chatter

It is another relatively busy day ahead for the EUR/USD. French business sentiment and business and consumer confidence figures from Italy will be in focus.

After better-than-expected German Ifo Business Climate Index numbers on Monday, investors will expect a similar trend. Economists forecast the Italian Business Confidence Index to slip from 102.8 to 102.5 and the French Business Survey to fall from 104 to 103.

While the numbers will draw interest, they will unlikely influence the ECB and its commitment to bring inflation to target.

With business and consumer sentiment in focus, investors should also monitor ECB member speeches. Executive Board member Andrea Enria and ECB President Lagarde will be in the spotlight. Commitment to continue targeting inflation despite banking sector woes would deliver EUR/USD support.

EUR/USD Price Action

This morning, the EUR/USD was up 0.13% to $1.08107. A mixed start to the day saw the EUR/USD fall to an early low of $1.07949 before rising to a high of $1.08195. The First Major Resistance Level (R1) at $1.0817 capped the upside.

Technical Indicators

The EUR/USD needs to avoid a fall through the $1.0781 pivot to retarget the First Major Resistance Level (R1) at $1.0817 and the morning high of $1.08195. A move through the morning high would signal a bullish session. However, the EUR/USD needs hawkish ECB chatter and better-than-expected business survey numbers to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0836 and resistance at $1.0850. The Third Major Resistance Level (R3) sits at $1.0891.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0761 into play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.07. The Second Major Support Level (S2) at $1.0725 should limit the downside. The Third Major Support Level (S3) sits at $1.0670.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The EUR/USD sits above the 50-day EMA ($1.07576). 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 ($1.0761) and the 50-day EMA ($1.07576) would support a breakout from R1 ($1.0817) to give the bulls a run at R2 ($1.0836) and $1.0850. However, a fall through S1 ($1.0761) and the 50-day EMA ($1.07576) would bring S2 ($1.0725) into play. 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. Goods trade data, housing sector numbers, and the all-important CB Consumer Confidence will be in the spotlight. We expect the consumer confidence survey to have more influence in the afternoon session.

While the economic indicators will provide the EUR/USD pair with direction, the Federal Reserve will also be in focus. The Committee on Banking, Housing, and Urban Affairs will meet in an open session to conduct a hearing on “Recent Bank Failures and the Federal Regulatory Response.”