Forex Market: EUR/USD scales over three-week peak on hawkish ECB indications

EUR/USD climbed to highs not seen in more than three weeks on Monday, as European Central Bank officials added to prospects of further aggressive policy tightening.

ECB policy makers said that they would need to raise the benchmark interest rate to 2% or even higher in order to curb record inflation in the Euro Area.

Bundesbank President Joachim Nagel said during an interview with German radio over the weekend that if the outlook for consumer prices did not change, “further clear steps must follow.”

Meanwhile, market players awaited the key US CPI inflation report due out on Tuesday, which may allow the Federal Reserve room to slow the pace of rate increases at its upcoming policy meeting next week.

Fed Governor Christopher Waller said on Friday that he favored “a significant increase at our next meeting,” and St. Louis Fed President James Bullard once again expressed support of a 75 basis point rate hike.

“Officials have clearly articulated the need for the FOMC to keep raising interest rates until there is compelling evidence that inflation is falling,” Joseph Capurso, a strategist at Commonwealth Bank of Australia, wrote in an investor note.

“Regardless of the outcome of the CPI report, we judge the FOMC has much more work to do,” which translates into further USD upside in the short and medium terms.

As of 8:30 GMT on Monday EUR/USD was gaining 1.39% to trade at 1.0183. During early European trading session, the major Forex pair climbed as high as 1.0198, which has been its strongest level since August 17th (1.0203).

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.0050
R1 – 1.0107
R2 – 1.0171
R3 – 1.0228
R4 – 1.0286

S1 – 0.9986
S2 – 0.9929
S3 – 0.9865
S4 – 0.9802