EUR/USD to Target $1.10 on US GDP and Jobless Claims Data
It is a quiet day ahead for the EUR/USD. The Italian economy is in the spotlight, with business and consumer confidence in focus. Economists forecast modest improvements in both, aligned with recent confidence numbers from other member states and the Eurozone.
Economists forecast the business confidence index to rise from 101.4 to 101.8 and the consumer confidence index to increase from 102.5 to 102.7.
Easing inflationary pressures and a return to growth across the Eurozone private sector should support a pickup in confidence at the turn of the year. However, rising interest rates and the war in Ukraine will likely limit the upside.
The prelim Eurozone composite PMI survey for January noted that output returned to growth beyond the borders of France and Germany. There was also a marked improvement in optimism about the year ahead, with the Eurozone PMI composite business expectations index seeing its most marked monthly increase since June 2020.
While the economic calendar is on the lighter side, there are no ECB member speeches for investors to consider. However, the markets need to monitor ECB member chatter with the media. A hawkish ECB has supported the EUR/USD return to $1.09. A stronger EUR is a contributor to bringing down inflation through cheaper imports.
EUR/USD Price Action
At the time of writing, the EUR was up 0.04% to $1.09162. The EUR/USD fell to an early low of $1.09114 before steadying.
The EUR/USD needs to avoid a fall through the $1.0898 pivot to target the First Major Resistance Level (R1) at $1.0938. A move through the Wednesday high of $1.09236 would signal a bullish session. However, the EUR/USD would need better-than-expected numbers from Italy and a risk-on session to support a breakout.
In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0964. The Third Major Resistance Level (R3) sits at $1.1031.
A fall through the pivot would bring the First Major Support Level (S1) at $1.0872 into play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.0850 and the Second Major Support Level (S2) at $1.0831.
The third Major Support Level (S3) sits at $1.0764.
Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.08427). 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 ($1.0872) and the 50-day EMA ($1.08427) would support a breakout from R1 ($1.0938) to target R2 ($1.0964). However, a fall through S1 ($1.0872) and the 50-day EMA ($1.08427) would bring S2 ($1.0831) into play. A fall through the 50-day EMA would signal a shift in sentiment.
The US Session
It is a busy day ahead on the US economic calendar. US jobless claims, Q4 GDP, and durable goods orders will draw interest. Softer growth and a pickup in jobless claims would deliver further EUR/USD support.
While it is a busier day on the economic calendar, no FOMC members are speaking today to influence. The Fed entered the blackout period on Saturday, January 21.