EUR/USD and a Look at $1.010 in the Hands of the ECB and US Inflation

It is a quiet day for the EUR/USD on the economic calendar. Italian industrial production figures for September are due early in the session. Forecasts are EUR/USD bearish, with economists forecasting a 1.5% slide in production.

However, the stats will unlikely force the ECB to deviate from its course on bringing inflation to target.

The numbers coincide with the ECB Economic Bulletin, which should have more impact on the EUR.

On Monday, ECB President Lagarde commented that inflation was too high and that rates would rise to bring it to target. Following Lagarde’s comments, the ECB Consumer Expectations Survey and the ECB’s assessment of the survey results drew interest on Tuesday.

Today’s Economic Bulletin will give investors a better picture of how the ECB views the economic outlook and inflation. ECB member commentary will also need monitoring today. ECB Members Andrea Enria and Isabel Schnabel will speak. Expect comments relating to inflation and monetary policy to influence.

EUR/USD Price Action

At the time of writing, the EUR was up 0.08% to $1.00163. A range-bound start to the day saw the EUR/USD fall to an early low of $1.00067 before rising to a high of $1.00163.

Technical Indicators

The EUR/USD needs to move through the $1.0030 pivot to target the First Major Resistance Level (R1) at $1.0067 and the Wednesday high of $1.00882. Hawkish ECB member chatter and risk-on sentiment would support a breakout from $1.0050 ahead of today’s US CPI report.

In the case of an extended rally, the bulls will likely take a run at the Second Major Resistance Level (R2) at $1.0125. The Third Major Resistance Level (R3) sits at $1.0220.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.9971 in play. In the case of an extended sell-off, the EUR/USD pair would likely test the Second Major Support Level (S2) at $0.9935 and support at $0.99.

The third Major Support Level (S3) sits at $0.9839.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($0.99499). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($0.9971) and the 50-day EMA ($0.99499) would support a breakout from R1 ($1.0067) to bring R2 ($1.0125) and $1.02 into view. However, a fall through S1 ($0.9971) and the 50-day EMA ($0.99499) would give the bears a run at S2 ($0.9935) and the 100-day EMA ($0.99122). The 200-day EMA sits at $0.98966.

The US Session

It is a busier day ahead on the US economic calendar. The all-important US CPI report for October will be the focal point today. Today’s CPI report will have a material impact on the Fed’s December policy decision. A pickup in inflationary pressure would see December pivot bets slide, which would be EUR/USD negative.

FOMC member chatter will also need monitoring. Members Harker, Logan, Mester, and George speak after the CPI report.

This morning, the probability of a December 75-basis point rate hike stood at 38.5% compared with 42.2% one week ago. Expect today’s CPI report to influence sentiment toward the December move.

Away from the economic calendar, the US mid-term elections results will also need tracking.