EURUSD Price Forecast: Failure to Return to $1.05 Leaves $1.035 in Play

After a quiet start to the week, it is a busier day ahead on the economic data front. For the EUR, key stats include ZEW Economic Sentiment figures for Germany and Eurozone industrial production numbers.

EUR sensitivity to the ZEW numbers will likely be evident as the markets look for an assessment of the German and Eurozone economies.

Earlier in the day, German inflation figures also drew interest.

German Inflation Supported the ECB Shift on Monetary Policy

According to finalized numbers, German consumer prices increased by 0.9% in May, which was in line with prelim figures. Consumer prices also rose by 0.9% in April.

According to Destatis,

• Germany’s annual rate of inflation accelerated from 7.4% to 7.9% in May.
• The inflation rate hit an all-time high for a third consecutive month since German reunification.
• While prices for energy products drove the rate of inflation higher in May, there were also price increases for other goods, particularly food.
• Year on year, energy prices were up 38.3%, with food prices up 11.1%.
• The annual inflation rate excluding energy and food was 3.8%.

EURUSD Price Action

At the time of writing, the EUR was up 0.53% to $1.0462.

A mixed start to the day saw the EUR fall to an early morning low of $1.0397 before striking a high of $1.0467.

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

Technical Indicators

The EUR will need to avoid a fall through the $1.0442 pivot to target the First Major Resistance Level at $1.0484.

Upbeat economic data for Germany and the Eurozone would be needed to support a breakout from the morning high.

An extended rally would test resistance at Monday’s high of $1.0520 and the Second Major Resistance Level at $1.0562.

A fall through the pivot would bring the First Major Support Level at $1.0364 into play.

Barring another extended sell-off throughout the day, the EUR should avoid sub-$1.03. The Second Major Support Level at $1.0321 should limit the downside.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. The EUR sat below the 50-day EMA, currently at $1.0604. The 50-day EMA slid back from the 100-day EMA. The 100-day EMA fell back from the 200-day EMA, EUR negative.

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

Next Up

After the ZEW Economic Sentiment and Eurozone industrial production figures, the market attention will shift to the US economic calendar.

Wholesale inflation figures from the US are due out later today. A spike in US wholesale inflation would test support for the EUR.

On the monetary policy front, ECB members McCaul and Schnabel are due to speak later in the day. Expect any comments on monetary policy and chatter on the economic outlook to influence the EUR.