EUR/USD and a Return to $1.0750 Euro Inflation and ECB Dependent

It is another busy day ahead for the EUR/USD. Early in the European session, Spanish unemployment figures will draw interest. After the better-than-expected February manufacturing PMI, investors will likely expect improving labor market conditions.

However, prelim euro area inflation figures for February will have more influence. Member state inflation CPI reports posted hotter-than-expected numbers mid-way through the first quarter. Today’s stats could leave the ECB on a more hawkish footing post-March.

Eurozone unemployment numbers are also due but should have a muted impact on the EUR/USD. After the latest stats, investors need to monitor ECB member speeches. ECB Executive Board member Isabel Schnabel will speak this afternoon. However, Schnabel will need to look beyond March to draw interest.

The ECB monetary policy meeting minutes should attract more interest. The ECB’s outlook on inflation, the economy, and monetary policy remain focal points.

EUR/USD Price Action

At the time of writing, the EUR/USD was down 0.15% to $1.06496. A mixed start to the day saw the EUR/USD rise to an early high of $1.06728 before falling to a low of $1.06447.

Technical Indicators

The EUR/USD needs to avoid the $1.0641 pivot to target the First Major Resistance Level (R1) at $1.0716. A move through the Wednesday high of $1.06914 would signal a bullish session. However, the EUR/USD would need the inflation numbers and the ECB minutes to support a breakout session. In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0767. The Third Major Resistance Level (R3) sits at $1.0893.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0590 into play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.0550 and the Second Major Support Level (S2) at $1.0515. The Third Major Support Level (S3) sits at $1.0388.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits below the 100-day EMA ($1.06656). However, the 50-day EMA narrowed to the 200-day EMA, with the 100-day EMA closing in on the 200-day EMA, delivering bullish signals.

A move through the 100-day ($1.06656) and 200-day ($1.06888) EMAs would support a breakout from R1 ($1.0716) to give the bulls a run at R2 ($1.0767). A move through the 200-day EMA would send a bullish signal. However, a fall through the 50-day EMA ($1.06292) would bring the Major Support Levels into play.

The US Session

Looking ahead to the US session, it is a relatively busy day on the US economic calendar. US jobless claims, unit labor costs, and nonfarm productivity numbers will be in focus. While nonfarm productivity numbers will draw interest, the jobless claims and unit labor costs will likely have more influence.

A further decline in initial jobless claims and a jump in unit labor costs would fuel market bets of a more hawkish Fed monetary policy outlook. FOMC member Waller will speak after today’s stats. Investors will want to know how high the Fed will be willing to go.

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