EUR/USD technical analysis - FX Empire.

EUR/USD Return to Parity in the Hands of US Inflation and Fed Chatter

It was a busy start to the European session for the EUR. Before the European opening bell, French inflation numbers drew interest.

The French annual inflation rate softened from 5.9% to 5.6%, with consumer prices falling by 0.5% in September. Economists forecast an annual inflation rate of 5.9% and a 0.1% monthly decline in consumer prices.

However, eurozone inflation figures were the key stats of the day. According to prelim figures, the Annual inflation rate accelerated from 9.1% to 10.0%. Economists forecast an annual rate of 9.7%.

According to Eurostat,

  • Energy was the largest contributor, with an estimated annual rate of 40.8% versus 38.6% in August.
  • Food, alcohol, & tobacco had an estimated annual rate of 11.8% versus 10.6% in August.

In the month of September, consumer prices increased by 1.2% after rising by 0.6% in August. Economists forecast a 1.0% rise.

While the stats of influence, ECB member reaction to the latest inflation figures will also draw attention. Frank Elderson and Isabel Schnabel speak today.

EUR/USD Price Action

At the time of writing, the EUR was up 0.10% to $0.98254.

A mixed morning saw the EUR/USD fall to an early low of $0.97943 before rising to a high of $0.98538.

EUR/USD finds early support.
EURUSD 300922 Daily Chart

Technical Indicators

The EUR/USD needs to avoid the $0.9756 pivot to target the First Major Resistance Level (R1) at $0.9875. Hawkish ECB member chatter would support a breakout from the morning high of $0.98538.

However, risk appetite will need to improve throughout the session to support a EUR/USD return to $0.9850. In the case of a breakout session, the EUR would likely test the Second Major Resistance Level (R2) at $0.9935 and resistance at $1.00.

The Third Major Resistance Level (R3) sits at $1.0115.

A fall through the pivot would bring the First Major Support Level (S1) at $0.9696 into play. However, barring a market flight to safety, the EUR/USD pair would likely avoid sub-$0.9600 and the Second Major Support Level (S2) at $0.9576.

The Third Major Support Level (S3) sits at $0.9396.

EUR/USD resistance levels in play above the pivot.
EURUSD 300922 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 100-day EMA, currently at $0.98399. The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA fell back from the 200-day EMA, delivering mixed signals.

A EUR/USD move through the 100-day EMA ($0.98399) would give the bulls a run at R1 ($0.9875) to target $0.99. The 200-day EMA sits at $0.99384. However, a EUR/USD fall through the 50-day EMA would bring the support levels into play.

EMAs bearish.
EURUSD 300922 4 Hourly Chart

The US Session

It is a busier day ahead on the US economic calendar. Personal spending and Core PCE Price Index will be in the spotlight. While the consumption numbers will influence, inflation will be the market focal point.

A larger than forecast pickup in the annual inflation rate would deliver another dollar breakout session. Economists forecast the Index to rise by 4.7% year-over-year in August, up from 4.6% in July.

Later in the session, finalized Michigan Consumer Sentiment and Expectation numbers are also out. Any material revisions would influence the dollar.

FOMC member commentary will also draw interest, with members Bowman, Mester and Williams and Fed Vice-Chair Brainard speaking today,

A pickup in inflationary pressure and hawkish Fed chatter would likely see the Dollar Spot Index (DXY) resume its move towards 115.