EUR/USD Forecast: Euro bears retain control as focus shifts to NFP
- EUR/USD trades at the lower limit of the weekly range near 1.1650.
- The technical outlook shows a buildup of bearish momentum in the near term.
- Nonfarm Payrolls in the US are forecast to rise by 60,000 in December.
EUR/USD stays on the back foot and trades near 1.1650 after closing in negative territory on Thursday. While investors prepare for the release of the key December employment data from the US, the pair's technical outlook suggests that the bearish bias stays intact.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.70% | 0.36% | 0.39% | 0.95% | -0.10% | 0.47% | 0.99% | |
| EUR | -0.70% | -0.34% | -0.26% | 0.25% | -0.79% | -0.23% | 0.29% | |
| GBP | -0.36% | 0.34% | -0.02% | 0.60% | -0.45% | 0.11% | 0.63% | |
| JPY | -0.39% | 0.26% | 0.02% | 0.53% | -0.52% | 0.04% | 0.60% | |
| CAD | -0.95% | -0.25% | -0.60% | -0.53% | -0.89% | -0.49% | 0.04% | |
| AUD | 0.10% | 0.79% | 0.45% | 0.52% | 0.89% | 0.57% | 1.10% | |
| NZD | -0.47% | 0.23% | -0.11% | -0.04% | 0.49% | -0.57% | 0.52% | |
| CHF | -0.99% | -0.29% | -0.63% | -0.60% | -0.04% | -1.10% | -0.52% |
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) benefited from the cautious market mood and a modest increase in the US Treasury bond yields on Thursday, causing EUR/USD to stretch lower.
Nonfarm Payrolls (NFP) in the US are forecast to rise by 60,000 in December following the 64,000 increase recorded in November. In this period, the Unemployment Rate is expected to edge lower to 4.5% from 4.6%.
According to the CME FedWatch Tool, markets see a less than 15% chance of a Federal Reserve (Fed) rate cut in January and price in about a 40% probability of a 25 basis points rate cut in March.
A significant positive surprise, with an NFP print of 80,000 or higher, could feed into expectations for two consecutive Fed policy holds in January and March. In this scenario, the USD could preserve its strength heading into the weekend and cause EUR/USD to extend its weekly slide. Conversely, investors could lean toward a rate cut in March and open the door for a recovery in the pair, if the employment report highlights worsening conditions in the labor market, with an uptick in the Unemployment Rate and an NFP reading of 30,000 or lower.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1647. The 20-period Simple Moving Average (SMA) slopes lower beneath the 50- and 100-period measures, while the pair trades below all four key averages. The 100-period SMA softens and the 200-period one edges higher but remains above spot, maintaining overhead pressure. The Relative Strength Index (RSI) prints 32 (near oversold), signaling bearish momentum. A descending trend line from 1.1801 caps rebounds, with resistance marked at 1.1712.
Measured from the 1.1503 low to the 1.1800 high, the 50% retracement stands at 1.1652 and is being tested as support. A clear break would expose the 61.8% retracement at 1.1617 and 1.1600 (static level), while rebounds could stall beneath the descending trend line as long as the short-term SMAs continue to slope lower.
(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.
