EURO Price Forecast: A Return to sub-$1.040 to Bring $1.035 into Play

After a hectic first half of the week, it is a quieter day ahead on the Eurozone economic calendar and for the EURO.

Key stats due out later today include finalized inflation figures from Italy.

On the monetary policy front, central bank chatter will also need monitoring following the Fed’s 75 basis point rate hike.

Ahead of the European open, car registrations for France, Germany, and Italy drew interest, with the figures considered a bellwether for the respective economies.

Car Registrations for May Disappoint after Heavy Declines in April

Car registrations took a big hit in April. Another decline tested support for the EUR. German car registrations slid by 25.3% in April, with French car registrations down by 26.1%.

In May, German car registrations fell by 10.2%, with French car registrations declining by 10.9%. Car registrations in Italy saw a more marked 15.1% slide.

EURO Price Action

At the time of writing, the EUR was down 0.14% to $1.04252.

A mixed start to the day saw the EUR strike an early high of $1.04693 before falling to a low of $1.04200.

The EUR left the Major Support and Resistance Levels untested early on.

EURO Technical Indicators

The EURO will need to move through the $1.0436 pivot to target Wednesday’s high of $1.0508 and the First Major Resistance Level at $1.0512.

Demand for riskier assets will need to improve to support a return to $1.05 levels.

An extended rally would test the Second Major Resistance Level at $1.0585 and resistance at $1.06. The Third Major Resistance Level sits at $1.0734.

Failure to move through the pivot would bring the First Major Support Level at $1.0363 into play.

Barring an extended sell-off throughout the day, the EURO should avoid sub-$1.03. The Second Major Support Level sits at $1.0287.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. The EURO sat below the 50-day EMA, currently at $1.05386. The 50-day EMA fell back from the 100-day EMA. The 100-day EMA eased back from the 200-day EMA: price negative.

A return to $1.05 would give the bulls a run at the 50-day EMA and a look at $1.06.

Next Up

Later in the day, the Bank of England will be in focus. The markets will be looking for the central bank’s outlook on inflation, the economy, and forward guidance on interest rates. Economists penciled in a 25-basis point rate hike.

From the US, Philly Fed Manufacturing Index and jobless claims figures will also influence the EURO.

Overnight, the FOMC statement talked of improved economic conditions and robust job gains in recent months, allowing the Fed to take a more aggressive rate path trajectory to curb inflation.

The statement also considered the Ukraine war and COVID-related lockdowns in China and their contribution to upward pressure on inflation and the further exasperation of supply chain disruptions.

For the ECB, the Eurozone economy may be more directly impacted by the above drivers than that of the US, which could limit the ECB’s wiggle room on monetary policy. This would limit any upside for the EURO.