EUR/USD Forecast: Euro bulls could hesitate ahead of France confidence vote
- EUR/USD holds above 1.1700 to start the new week.
- The US Dollar struggles to find demand following the disappointing employment report.
- French Prime Minister François Bayrou is widely expected to lose the confidence vote.
EUR/USD closed the previous week marginally higher, thanks to a late rally on Friday. The pair holds its ground and trades comfortably above 1.1700 in the European session on Monday.
Euro Price Last 7 Days
The table below shows the percentage change of Euro (EUR) against listed major currencies last 7 days. Euro was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.31% | -0.16% | 0.41% | 0.59% | -0.60% | -0.61% | -0.45% | |
| EUR | 0.31% | 0.15% | 0.64% | 0.91% | -0.29% | -0.31% | -0.13% | |
| GBP | 0.16% | -0.15% | 0.38% | 0.76% | -0.44% | -0.45% | -0.24% | |
| JPY | -0.41% | -0.64% | -0.38% | 0.26% | -0.99% | -0.97% | -0.81% | |
| CAD | -0.59% | -0.91% | -0.76% | -0.26% | -1.18% | -1.20% | -0.99% | |
| AUD | 0.60% | 0.29% | 0.44% | 0.99% | 1.18% | -0.01% | 0.21% | |
| NZD | 0.61% | 0.31% | 0.45% | 0.97% | 1.20% | 0.01% | 0.21% | |
| CHF | 0.45% | 0.13% | 0.24% | 0.81% | 0.99% | -0.21% | -0.21% |
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 heavy selling pressure in the American session on Friday after the Bureau of Labor Statistics announced that Nonfarm Payrolls (NFP) rose by only 22,000 in August. This reading missed the market expectation for an increase of 75,000 by a wide margin. Additionally, June's NFP increase got revised down by -27,000, from 14,000 to -13,000. With this data reminding markets of worsening conditions in the US labor market, the USD weakened against its rivals.
According to the CME FedWatch Tool, the probability of the Federal Reserve (Fed) cutting the policy rate in September and October rose above 70% from below-50% ahead of the release of the employment report.
Later in the day, markets will be paying close attention to the outcome of the confidence vote in French Prime Minister Francois Bayrou, who called the vote himself after failing to pass the budget for 2026 that would require austerity measures, worth about €44 billion.
Bayrou is widely expected to lose the vote and such a result shouldn't be surprising. However, it's unclear whether President Emmanuel Macron will call a snap election. "After the fall of a conservative and a centrist as prime minister, most observers expect Macron to next look for a candidate from the ranks of the centre-left Socialists (PS)," Reuters said reporting on the issue.
In case Macron calls for a snap election, the Euro could come under selling pressure with the initial reaction. Even if Macron appoints a new Prime Minister, the Euro could still have a hard time gathering strength unless markets see a clear fiscal path forward.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly above 60 and EUR/USD continues to trade well above the 20-period, 50-period, 100-period and 200-period Simple Moving Averages, reflecting a bullish stance in the short term.
On the upside, 1.1760 (static level) aligns as the first resistance level before 1.1800 (static level, round level) and 1.1830 (July 1 high). Looking south, support levels could be spotted at 1.1700 (static level, round level), 1.1670 (20-day SMA, 50-day SMA, 100-period SMA) and 1.1640 (200-period 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.
