EUR/USD Forecast: Buyers could look to retain control while 1.0800 holds as support
- EUR/USD snapped a three-day losing streak on Wednesday.
- The pair struggles to preserve its bullish momentum on Thursday.
- Technical buyers could remain interested while 1.0800 holds as support.
EUR/USD turned north in the early American session on Wednesday and climbed above 1.0850. Although the pair erased a portion of its gains, it closed the day in positive territory and snapped a three-day losing streak. Early Thursday, EUR/USD holds steady at around 1.0800.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | -0.59% | 0.24% | -0.19% | -1.10% | -1.23% | -0.23% | |
| EUR | 0.08% | -0.17% | 0.56% | 0.14% | -0.74% | -0.88% | 0.10% | |
| GBP | 0.59% | 0.17% | 0.87% | 0.31% | -0.57% | -0.71% | 0.25% | |
| JPY | -0.24% | -0.56% | -0.87% | -0.44% | -1.41% | -1.56% | -0.44% | |
| CAD | 0.19% | -0.14% | -0.31% | 0.44% | -0.87% | -1.02% | -0.06% | |
| AUD | 1.10% | 0.74% | 0.57% | 1.41% | 0.87% | -0.14% | 0.86% | |
| NZD | 1.23% | 0.88% | 0.71% | 1.56% | 1.02% | 0.14% | 0.97% | |
| CHF | 0.23% | -0.10% | -0.25% | 0.44% | 0.06% | -0.86% | -0.97% |
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 Bureau of Labor Statistics (BLS) reported on Wednesday that inflation in the US, as measured by the change in the Consumer Price Index (CPI), fell to 3.3% on a yearly basis in May from 3.4% in April. The annual core CPI, which excludes volatile food and energy prices, rose 3.4%, below the market expectation of 3.5%. On a monthly basis, the CPI was unchanged, while the core CPI was up 0.2%. The US Dollar (USD) came under heavy selling pressure following the inflation data and allowed EUR/USD to push higher.
In the second half of the day, the Federal Reserve (Fed) said that it left the policy rate unchanged at 5.25%-5.5% following the June meeting, as widely anticipated. The revised Summary of Economic Projections, the so called dot-plot published alongside the policy statement, showed that 4 of 19 officials saw no rate cuts in 2024, 7 projected a 25 basis points (bps) rate reduction, while 8 marked down a 50 bps cut in the policy rate.
Fed Chairman Jerome Powell adopted a cautious tone on the timing of the policy pivot, reiterating the data-dependent approach. The USD found a foothold in the Fed aftermath and limited EUR/USD's upside.
On Thursday, the BLS will release Producer Price Index (PPI) data for May. The annual PPI is forecast to rise 2.5% following the 2.2% increase recorded in April. In case this data comes in below the market expectation, the USD could have a hard time finding demand and help EUR/USD regain its traction.
EUR/USD Technical Analysis
Key pivot area for EUR/USD seems to have formed at 1.0790-1.0800, where the Fibonacci 38.2% retracement level of the latest uptrend meets the 100-day and the 200-day Simple Moving Averages (SMA). In case the pair continues to use that level as support, technical buyers could remain interested. In this scenario, 1.0840-1.0850 (100-period SMA on the 4-hour chart, Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level) could be seen as next resistances.
If 1.0790-1.0800 support fails, sellers could take action and drag EUR/USD lower toward 1.0760 (Fibonacci 50% retracement) and 1.0730 (Fibonacci 61.8% retracement).
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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
