EUR/USD Forecast: Can the ECB save the Euro?
- EUR/USD edged lower to the 1.0550 area early Thursday.
- The ECB is widely expected to leave key rates unchanged.
- The US economic docket will feature third-quarter growth data.
EUR/USD stretched to a fresh weekly low below 1.0550 early Thursday after closing in negative territory for the second consecutive day on Wednesday.
The US Dollar (USD) outperformed its rivals mid-week, supported by rising US Treasury bond yields. Additionally, the negative shift witnessed in risk mood on news of Israel preparing for a ground assault allowed the USD to find demand as a safe haven.
Markets remain risk-averse early Thursday, with the US stock index futures and the Euro Stoxx 50 trading deep in the red.
Euro price this week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.40% | 0.64% | 0.65% | 0.13% | 0.33% | 0.38% | 0.70% | |
| EUR | -0.41% | 0.24% | 0.24% | -0.27% | -0.08% | -0.01% | 0.30% | |
| GBP | -0.64% | -0.25% | 0.01% | -0.52% | -0.31% | -0.27% | 0.07% | |
| CAD | -0.65% | -0.25% | -0.02% | -0.52% | -0.32% | -0.26% | 0.05% | |
| AUD | -0.14% | 0.30% | 0.52% | 0.52% | 0.21% | 0.24% | 0.58% | |
| JPY | -0.34% | 0.06% | 0.27% | 0.30% | -0.26% | 0.01% | 0.36% | |
| NZD | -0.37% | 0.02% | 0.25% | 0.26% | -0.25% | -0.05% | 0.32% | |
| CHF | -0.71% | -0.31% | -0.07% | -0.06% | -0.58% | -0.38% | -0.32% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The European Central Bank (ECB) is widely expected to leave key rates unchanged following the October policy meeting. In case the ECB leaves the door open for additional tightening in the near future, the initial reaction could provide a boost to the Euro. Market participants will also pay close attention to the language in the policy statement and ECB President Christine Lagarde's comments.
If the ECB acknowledges softening inflation and adopts a more concerned tone regarding the growth outlook, this could be seen as a dovish language and hurt the Euro. On the other hand, EUR/USD could find support in case the ECB puts more emphasis on inflation risks rather than the growth outlook.
Before Lagarde's press conference starts at 12:45 GMT, the US Bureau of Economic Analysis (BEA) will release the first estimate of the third-quarter Gross Domestic Product (GDP) growth. Investors forecast the US economy to register an annualized growth of 4.2% in the third quarter. A disappointing reading at or below 3.5% could cause the USD to weaken with the initial reaction. With a print close to the market consensus, the Euro's reaction to the ECB policy announcements could drive EUR/USD's action.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart declined to 40 and EUR/USD closed the last two 4-hour candles below the 50-period and the 100-period Simple Moving Averages (SMA), highlighting a build-up of bearish momentum.
On the downside, 1.0520 (static level) aligns as interim support before 1.0500 (psychological level, static level) and 1.0450 (end-point of the latest downtrend).
In case EUR/USD manages to reclaim 1.0570 (Fibonacci 23.6% retracement of the latest downtrend, 50-period SMA, 100-period SMA), 1.0600 (200-period SMA) could act as next resistance ahead of 1.0640 (Fibonacci 38.2% retracement).
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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.
