EUR/USD Return to $0.9950 in the Hands of German Business Sentiment

It is a quiet session for the EUR/USD, with German Ifo Business Climate Index figures for October in the spotlight.

On Monday, German private sector PMI numbers revealed worsening economic conditions in October. According to prelim numbers, the manufacturing PMI fell from 47.8 to a 28-month low of 45.7.

Businesses across the private sector remained ‘deeply pessimistic,’ citing soaring energy costs, high inflation, rising interest rates, and the prospect of a recession.

Considering Monday‘s report, today’s numbers need to impress to move the dial. The markets likely expect business sentiment to deteriorate when considering German businesses current headwinds. Economists forecast the Ifo Business Climate Index to fall from 84.3 to 83.3. In September, the Index fell to its lowest level since May 2020.

On the ECB calendar, no members are due to deliver speeches, leaving ECB member chatter with the media to influence.

EUR/USD Price Action

At the time of writing, the EUR was up 0.06% to $0.98800. A mixed start to the day saw the EUR fall to an early low of $0.98665 before rising to a high of $0.98834.

Technical Indicators

The EUR/USD needs to avoid the $0.9860 pivot to target the First Major Resistance Level (R1) at $0.9913. Better-than-expected Ifo Business Climate figures would support a breakout from the Monday high of $0.98992. However, the CB Consumer Confidence Index would need to slide to sub-100 to deliver a EUR/USD return to $0.99.

In the case of an extended rally, the bulls will likely take a run at the Second Major Resistance Level (R2) at $0.9952. The Third Major Resistance Level (R3) sits at $1.0045.

A fall through the pivot would bring the First Major Support Level (S1) at $0.9821 into play. In the case of an extended sell-off, the EUR/USD pair would likely test the Second Major Support Level (S2) at $0.9767 and support at $0.9750.

The third Major Support Level (S3) sits at $0.9675.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 200-day EMA ($0.98483). The 50-day EMA pulled away from the 100-day EMA, after Mondays bullish cross, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals.

Avoiding the 200-day EMA ($0.98483) would support a move through R1 ($0.9913) to target R2 ($0.9952). However, a fall through the 200-day EMA ($0.98483) would bring S1 ($0.9821) and the 50-day ($0.98040) and 100-day ($0.98027) EMAs into play.

The US Session

It is a relatively quiet day ahead on the US economic calendar, with US consumer confidence as the key stat of the day. Following the disappointing private sector PMIs on Monday, a slide to sub-100 would adversely impact the dollar.

However, no FOMC members will speak to guide the markets following todays stats. The FOMC blackout period started on Saturday and will extend until November 3.

Going into the Tuesday session, the FedWatch Tool had the probability of November and December rate hikes at 95.5% and 54.9%, respectively. One week ago, the likelihood of a 75-basis point hike in December stood at 65.7%.