EUR/USD Weekly Forecast – The ECB and the US Inflation in Focus

On the economic data front, it is a quiet week ahead for the EUR/USD.

German industrial production and inflation figures will be in focus on Monday and Wednesday. While the production numbers will influence, revisions to prelim inflation numbers will likely have more impact.

Finalized inflation numbers from France and Spain wrap up the week on Friday.

With economic indicators on the light side, investors should track ECB commentary. ECB President Lagarde (Thurs), ECB Chief Economist Philip Lane (Mon/Tues) and ECB Executive Board Members Isabel Schnabel (Tues/Thurs), and Luis de Guindos (Thurs/Fri) are on the calendar to speak this week.

EUR/USD Technical Indicators

The EUR/USD needs to avoid the $1.1017 pivot to target the First Major Resistance Level (R1) at $1.1092 and last week’s high of $1.1092. A return to $1.1050 would signal a bullish week. However, the US CPI Report and ECB commentary need to deliver EUR support to give the bulls a run at $1.12.

In the case of a breakout week, the EUR would likely test resistance at the Second Major Resistance Level (R2) at $1.1167 and resistance at $1.12. The Third Major Resistance Level (R3) sits at $1.1318.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0942 into play. In the case of a data and central bank-fueled sell-off, the EUR/USD would likely test the Second Major Support Level (S2) at $1.0867.

The Third Major Support Level (S3) sits at $1.0717.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA, currently at $1.10140. 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 the 50-day EMA ($1.10140) would support a breakout from R1 ($1.1092) to give the bulls a run at R2 ($1.1167) and $1.12. However, a fall through the 50-day EMA ($1.10140) would bring the 100-day EMA ($1.09902) and S1 ($1.0942) into play. A fall through the 50-day EMA would send a bearish signal and give the bears a look at sub-$1.09 Major Support Levels.

The US Week Ahead

The US CPI Report will impact the EUR/USD on Wednesday. Following the US Jobs Report, a hotter-than-expected US CPI Report would refuel bets on a June Fed interest rate hike.

On Thursday, wholesale inflation and jobless claims figures will also draw interest before consumer sentiment numbers on Friday.

Investors should track FOMC member reactions to the US Jobs Report and the incoming US CPI Report.

According to the CME FedWatch Tool, the probability of a 25-basis point June interest rate hike rose from 0.0% to 8.5%. On Friday, the US Jobs Report drove the modest rise. However, the US Jobs Report wiped out bets on a June Fed interest rate cut.