It is a busy day for the EUR/USD on the economic calendar. Early in the European session, finalized German inflation numbers for November will draw interest ahead of Italian industrial production figures for October.
Without revisions to the prelim German inflation numbers, the Italian industrial production figures will likely have more influence.
Later in the session, ZEW Economic Sentiment figures for Germany and the Eurozone will also provide direction. Economists forecast Germany’s ZEW Economic Sentiment Indicator to rise from -36.7 to -26.4.
While the numbers will influence, the reports are unlikely to impact ECB’s interest rate decision on Thursday, which will likely hinge on the latest economic and inflation projections.
From the ECB, no ECB members are speaking today to influence the EUR/USD. The lack of central bank chatter will likely leave the EUR/USD in the hands of the US economic calendar and today’s US CPI Report that could signal possible monetary policy divergence going into this week’s central bank policy decisions.
EUR/USD Price Action
At the time of writing, the EUR was up 0.03% to $1.05406. A mixed start to the day saw the EUR/USD fall to an early low of $1.05313 before rising to a high of $1.05408.
Technical Indicators
The EUR/USD needs to move through the $1.0541 pivot to target the First Major Resistance Level (R1) at $1.0576 and the Monday high of $1.05802. Risk-on sentiment and positive EUR/USD stats would support a bullish start to the day, though the US CPI report will be the key driver.
In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0616. The Third Major Resistance Level (R3) sits at $1.0690.
Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0502 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.0450. The Second Major Support Level (S2) at $1.0467 should limit the downside.
The third Major Support Level (S3) sits at $1.0392.
Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.05009). The 50-day EMA moved away from the 100-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals.
A hold above S1 ($1.0502) and the 50-day EMA ($1.05009) would support a breakout from R1 ($1.0576) to target R2 ($1.0616). However, a fall through S1 ($1.0502) and the 50-day EMA ($1.05009) would bring S2 ($1.0467) into play. The 200-day EMA sits at $1.02986.
The US Session
It is a big day ahead, with the November US CPI report in the spotlight. The market bets are for the Fed to hike interest rates by 50 basis points. A hotter-than-expected inflation number could deliver uncertainty ahead of tomorrow’s decision.
While Fed Chair Powell talked about the Fed taking its foot off the gas, Powell did not provide a timeline. The US Jobs Report, Service Sector PMI numbers, and inflation figures continue to support a hawkish stance, leaving the CPI Report to influence Wednesday’s policy move and forward guidance.
No FOMC members will speak today. The Fed entered the blackout period on Sunday, December 3.
