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For the EUR, it is a relatively quiet day on the Eurozone economic calendar. German wholesale inflation figures for June were in focus this morning.
With the ECB in action on Thursday, and the markets betting on a 50-basis point rate hike despite economic woes, today’s figures reinforced the need for action. However, the softer numbers will create some uncertainty over whether the ECB will deliver a 25 or 50-basis point rate hike.
Before the Tuesday session, the markets had priced in a 25-basis point rate hike. On Tuesday, however, news hit the wires of the ECB considering a 50-basis point rate hike.
In June, the German Producer Price Index increased by just 0.6%, falling well short of a forecasted 1.3% increase. The Index climbed by 1.6% in May.
The annual rate of wholesale inflation slipped from 33.6% to 32.7% versus a forecasted 33.9%.
Later today, Eurozone consumer confidence will also be in the spotlight, which could test EUR support. Economists forecast a fall in the Consumer Confidence Index from -23.6 to -24.9.
EUR/USD Price Action
At the time of writing, the EUR was up 0.02% to $1.02265.
A mixed morning saw the EUR fall to an early low of $1.02215 before rising to a high of $1.02731.
Technical Indicators
The EUR/USD will need to avoid a fall through the $1.0204 pivot to target the First Major Resistance Level (R1) at $1.0289.
Market bets of a 50-basis point rate hike and another hike in September would support a breakout from the Tuesday high of $1.02692.
An extended rally would likely see the EUR/USD pair test the Second Major Resistance Level (R2) at $1.0353 before any pullback.
The Third Major Resistance Level (R3) sits at $1.0504.
A fall through the pivot would bring the First Major Support Level (S1) at $1.0139 into play.
An extended sell-off throughout the day would likely see the EUR/USD test support at $1.0100. However, we expect the EUR to avoid the second Major Support Level (S2) at $1.0054.
The Third Major Support Level sits at $0.9904.
Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal.
At the time of writing, the EUR sat above the 100-day EMA, currently at $1.02255.
The 50-day EMA narrowed to the 100-day EMA, with the 100-day EMA flattening on the 200-day EMA, which are EUR/USD price positives.
A breakout from R1 would support a run at the 200-day EMA, currently at $1.0348, and R2.
The US Session
It is another quiet day ahead on the US economic calendar. Housing sector data, including existing home sales, are in focus later today. However, we don’t expect the numbers to influence the EUR/USD.