EUR/USD Bears to Target Sub-$1.06 on a Hot US CPI Report

It is a busy day ahead for the EUR/USD. Early in the European session, German wholesale inflation figures will draw interest. Wholesale Price Index figures for January are a leading indicator of consumer price inflation.

According to prelim numbers, German consumer price inflation softened in January. A pickup in wholesale inflation would signal a possible pickup in German consumer price inflation in late Q1 that would question the ECB’s inflation forecasts.

Economists forecast the German Wholesale Price Index to rise 8.8% year-over-year versus 12.8% in December.

Later in the morning session, the second estimate of Eurozone GDP numbers for Q4 will also draw plenty of interest. Upward revisions would give the ECB room to deliver policy goals to bring inflation to target.

Economists forecast the Eurozone economy to grow by 0.1% in Q4 and by 1.9% year-over-year, in line with 1^st estimates. Revisions will influence.

While there are plenty of stats to consider, investors need to monitor ECB member speeches. ECB executive board member Luis de Guindos will speak this afternoon.

The ECB will also release Economic Bulletin pre-releases relating to natural gas and energy price impact on industrial production and imports.

EUR/USD Price Action

At the time of writing, the EUR/USD was up 0.05% to $1.07243. A mixed start to the day saw the EUR/USD fall to an early low of $1.07184 before rising to a high of $1.07253.

Technical Indicators

The EUR/USD needs to avoid the $1.0701 pivot to target the First Major Resistance Level (R1) at $1.0747. A move through the Monday high of $1.07299 would signal a bullish session. However, the EUR/USD would need ECB member chatter and today’s stats to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0776. The Third Major Resistance Level (R3) sits at $1.0850.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0673 into play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.06. The Second Major Support Level (S2) at $1.0627 should limit the downside.

The third Major Support Level (S3) sits at $1.0552.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 200-day EMA ($1.07438). The 50-day EMA closed in on the 200-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 200-day EMA ($1.07438) and R1 ($1.0747) would give the bulls a run at the 50-day ($1.07553) and R2 ($1.0776). A move through the 50-day EMA would send a bullish signal. However, failure to move through the 200-day EMA ($1.07438) would leave S1 ($1.0673) in view.

The US Session

It is a big day on the US economic calendar. The heavily anticipated US CPI Report will be the report of the day.

An unexpected pickup in inflationary pressure would weigh on the EUR/USD and riskier assets. Economists forecast the US annual inflation rate to soften from 6.5% to 6.2%.

With inflation in focus, investors also need to monitor FOMC member chatter. FOMC members Logan and Williams will speak today.