EUR/USD Forecast: Bulls take action on growing Fed rate cut expectations
- EUR/USD rises toward 1.1600, trades at a fresh weekly high.
- Markets see a stronger than 80% chance of a Fed rate cut in December.
- The near-term technical outlook points to a buildup in bullish momentum.
EUR/USD continues to edge higher toward 1.1600 after posting gains on Tuesday and trades at a fresh weekly high. The technical outlook points to a bullish tilt in the short-term outlook.
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 | -0.55% | -0.54% | -0.09% | -0.20% | -0.63% | -1.09% | -0.34% | |
| EUR | 0.55% | 0.00% | 0.47% | 0.35% | -0.09% | -0.55% | 0.21% | |
| GBP | 0.54% | -0.00% | 0.43% | 0.34% | -0.10% | -0.56% | 0.20% | |
| JPY | 0.09% | -0.47% | -0.43% | -0.09% | -0.58% | -1.13% | -0.23% | |
| CAD | 0.20% | -0.35% | -0.34% | 0.09% | -0.44% | -0.90% | -0.16% | |
| AUD | 0.63% | 0.09% | 0.10% | 0.58% | 0.44% | -0.45% | 0.32% | |
| NZD | 1.09% | 0.55% | 0.56% | 1.13% | 0.90% | 0.45% | 0.76% | |
| CHF | 0.34% | -0.21% | -0.20% | 0.23% | 0.16% | -0.32% | -0.76% |
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).
The US Dollar (USD) came under renewed selling pressure in the American session on Tuesday as the disappointing labor market data fed into expectations for a 25 basis points (bps) Federal Reserve (Fed) rate cut in December.
The Automatic Data Processing's (ADP) weekly report showed that private employers shed an average of 13,500 jobs a week for the four weeks ending November 8. Following this report, the CME Group FedWatch Tool's probability of a December Fed rate cut climbed above 80%.
The US economic calendar will feature September Durable Goods Orders and the weekly Initial Jobless Claims data.
Investors expect the number of first-time applications for unemployment benefits to rise to 225,000 from 220,000 in the previous week. A noticeable decline in this data, with a reading close to 200,000, could ease concerns over the labor market conditions and help the USD stay resilient against its rivals. On the other hand, a print above the market expectation could have the opposite impact on the USD's valuation, opening the door for a leg higher in EUR/USD.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) has started to curl higher toward the 50-, 100-, and 200-period SMAs. Spot trades above all these averages, with the 200-period SMA at 1.1585 aligning as a pivot point. The Relative Strength Index (14) stands at 61.43, showing improving bullish momentum without overbought conditions.
Measured from the 1.1888 high to the 1.1471 low, the 38.2% retracement at 1.1630 acts as the next resistance level, followed by the 50% retracement at 1.1680. Immediate support aligns at 1.1569 (23.6% retracement) ahead of 1.1535 (20-period SMA) and 1.1500 (static level, round level).
(The technical analysis of this story was written with the help of an AI tool)
Euro FAQs
The Euro is the currency for the 20 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.
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.
