EUR/USD to Target $1.09 on German Stats and ECB President Lagarde

It is a busy start to the week for the EUR/USD. Early in the European session, German wholesale inflation numbers will be in focus. As a leading indicator of consumer price inflation, softer numbers would support a continued softening in German inflation.

Economists forecast the annual wholesale inflation rate to soften from 14.9% to 13.3%.

With the economic calendar on the busier side, ECB member commentary also needs monitoring. ECB President Lagarde and Mr. Panetta will speak at the Eurogroup meeting in Brussels. The ECB will also release the Research Bulletin, which will likely draw interest.

The Research Bulletin considers a selection of recent work on policy-relevant topics by ECB economists and is published monthly.

EUR/USD Price Action

At the time of writing, the EUR was down 0.08% to $1.08231. A mixed start to the day saw the EUR/USD rise to an early high of $1.08351 before falling to a low of $1.08202.

Technical Indicators

The EUR/USD needs to move through the $1.0827 pivot to target the First Major Resistance Level (R1) at $1.0873 and the Friday high of $1.08678. A move through $1.0850 would signal another bullish session. The German wholesale and economic sentiment numbers would have to be EUR-friendly to support a bullish session.

In the case of an extended rally, the bulls will likely test resistance at the Second Major Resistance Level (R2) at $1.0914. The Third Major Resistance Level (R3) sits at $1.1002.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0785 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.0750 and the Second Major Support Level (S2) at $1.0739.

The third Major Support Level (S3) sits at $1.0652.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.07302). 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 the 50-day EMA ($1.07302) would support a breakout from R1 ($1.0873) to target R2 ($1.0914). However, a fall through S1 ($1.0785) would give the bears a run at the S2 ($1.0785) and the 50-day ($1.07302). A fall through the 50-day EMA would signal a shift in sentiment.

The US Session

It is a quiet day ahead on the US economic calendar, with the US markets closed. The lack of US economic indicators would leave FOMC member commentary in focus.

Hawkish chatter would test the market bets of a 25-basis point Fed interest rate hike in February.