EUR/USD Forecast: A strong NFP report could discourage bulls
- EUR/USD trades in positive territory above 1.0800 in the European session on Friday.
- The US economic calendar will feature employment data for February.
- An upbeat US jobs report could trigger profit-taking heading into the weekend.
EUR/USD regains bullish momentum and trades above 1.0800 in the European morning on Friday, after closing virtually unchanged on Thursday. The pair remains technically overbought as market focus shifts to February employment data from the US.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -4.33% | -2.64% | -1.92% | -1.11% | -1.71% | -2.25% | -2.60% | |
| EUR | 4.33% | 1.65% | 2.31% | 3.18% | 2.64% | 1.98% | 1.61% | |
| GBP | 2.64% | -1.65% | 0.76% | 1.50% | 0.98% | 0.33% | -0.02% | |
| JPY | 1.92% | -2.31% | -0.76% | 1.07% | 0.28% | -0.27% | -0.68% | |
| CAD | 1.11% | -3.18% | -1.50% | -1.07% | -0.46% | -1.16% | -1.50% | |
| AUD | 1.71% | -2.64% | -0.98% | -0.28% | 0.46% | -0.64% | -0.99% | |
| NZD | 2.25% | -1.98% | -0.33% | 0.27% | 1.16% | 0.64% | -0.35% | |
| CHF | 2.60% | -1.61% | 0.02% | 0.68% | 1.50% | 0.99% | 0.35% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Following the March policy meeting, the European Central Bank (ECB) decided to lower key rates by 25 basis points (bps), as widely anticipated. In its policy statement, the ECB repeated that future interest rate decisions will be based on "the assessment of inflation outlook in light of incoming economic and financial data, dynamics of underlying inflation, and strength of monetary policy transmission." While speaking to reporters in the post-meeting press conference, ECB President Christine Lagarde said that they will remain data-dependent and make decisions on a meeting-by-meeting basis. Amid a lack of fresh clues on the ECB policy outlook, EUR/USD spent the day fluctuating in a relatively tight range.
Nonfarm Payrolls (NFP) in the US are forecast to rise by 160,000 in February, following the disappointing 143,000 increase recorded in January. A reading close to 200,000 could support the US Dollar (USD) with the immediate reaction. Investors could also see that as an opportunity to book some profits, triggering a downward correction in EUR/USD.
On the other hand, a disappointing jobs report could feed into concerns over an economic downturn in the US and make it difficult for the USD to hold its ground. According to the CME FedWatch Tool, markets are currently pricing in about 50% probability of a Federal Reserve policy hold in May, suggesting that the USD is facing a two-way risk heading into the event.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 80, suggesting that EUR/USD remains technically overbought.
On the upside, first resistance could be spotted at 1.0900 (static level, round level) ahead of 1.0940 (static level from November) and 1.1000 (round level, psychological level). Looking south, supports could be spotted at 1.0800 (round level, static level), 1.0760 (static level) and 1.0730 (200-day SMA).
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
