EUR/USD Bulls Need German Industrial Production Surge to Target $1.10

It is a relatively quiet day ahead for the EUR/USD. German industrial production figures will draw interest early in the session. Following the sharp increase in factory orders, investors will expect a bullish number to ease recessionary fears.

Service sector PMI numbers from China beat forecasts this morning. The Caixin Services PMI rose from 55.0 to 57.8 versus a forecasted 54.8. Service sector activity continues to outmuscle the manufacturing sector in China, the euro area, and the US. A pickup in German manufacturing sector activity would be a boon for the EUR.

Investors should also consider ECB member speeches, with the economic calendar on the light side. However, no Executive Board members are on the calendar to speak, leaving chatter with the media to influence.

On Wednesday, ECB Chief Economist discussed inflation, reportedly saying,

“I look at food, where inflation pressure is probably its most intense. And it’s still rising now. I don’t think we are yet at the peak of food inflation, it’s not yet there, but again it’s projected to fall this year.”

According to prelim euro area figures, food, alcohol, & tobacco saw the highest annual rate at 15.4% versus 15.0% in February.

EUR/USD Price Action

This morning, the EUR/USD was down 0.15% to $1.08858. A mixed start to the day saw the EUR/USD rise to an early high of $1.09106 before falling to a low of $1.08845.

Technical Indicators

The EUR/USD needs to move through the $1.0921 pivot to target the First Major Resistance Level (R1) at $1.0951 and the Wednesday high of $1.09696. A return to $1.0950 would signal a bullish session. However, the EUR/USD needs hawkish ECB chatter and hotter-than-expected industrial production figures to support a pre-US session breakout.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.1000. The Third Major Resistance Level (R3) sits at $1.1078.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0872 in play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.080. The Second Major Support Level (S2) at $1.0842 should limit the downside. The Third Major Support Level (S3) sits at $1.0764.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The EUR/USD sits above the 50-day EMA ($1.08678). The 50-day EMA pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.0872) and the 50-day EMA ($1.08678) would support a breakout from R1 ($1.0951) to give the bulls a run at R2 ($1.1000). However, a fall through S1 ($1.0872) and the 50-day EMA ($1.08678) would bring S2 ($1.0842) into play. A fall through the 50-day EMA would send a bearish signal.

The US Session

Looking ahead to the US session, it is a quiet day on the US economic calendar. Weekly jobless claims figures will draw interest. Following the disappointing JOLTs job openings and ADP nonfarm employment change numbers, a larger-than-expected rise in jobless claims would pressure the EUR/USD on US recessionary fears.

Investors should also monitor Fed chatter on monetary policy and the US economy.