EUR/USD Forecast: Euro bulls could retain control once 1.0800 is confirmed as support
- EUR/USD consolidates weekly gains near 1.0800 early Thursday.
- Financial markets in the US will remain closed on Independence Day.
- Euro needs to confirm 1.0800 as support to continue to push higher.
EUR/USD gathered bullish momentum and climbed above 1.0810 to touch its highest level since June 12 on Wednesday. The pair stays in a consolidation phase near 1.0800 early Thursday.
Disappointing macroeconomic data releases from the US triggered a US Dollar (USD) selloff during the American trading hours on Wednesday and helped EUR/USD turn north.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.80% | -0.88% | 0.34% | -0.39% | -0.77% | -0.31% | 0.35% | |
| EUR | 0.80% | -0.31% | 0.84% | 0.11% | -0.09% | 0.19% | 0.86% | |
| GBP | 0.88% | 0.31% | 1.13% | 0.43% | 0.23% | 0.50% | 1.17% | |
| JPY | -0.34% | -0.84% | -1.13% | -0.72% | -1.04% | -0.65% | 0.04% | |
| CAD | 0.39% | -0.11% | -0.43% | 0.72% | -0.34% | 0.07% | 0.74% | |
| AUD | 0.77% | 0.09% | -0.23% | 1.04% | 0.34% | 0.27% | 1.02% | |
| NZD | 0.31% | -0.19% | -0.50% | 0.65% | -0.07% | -0.27% | 0.69% | |
| CHF | -0.35% | -0.86% | -1.17% | -0.04% | -0.74% | -1.02% | -0.69% |
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 ADP reported that private sector payrolls rose 150,000 in June, falling short of analysts' estimate of 160,000, and the weekly data published by the Department of Labor showed that there were 238,000 first-time applications for unemployment benefits, up from 233,000 in the previous week.
Finally, the ISM Services PMI dropped to 48.8 in June from 53.8 in May, pointing to a contraction in the service sector's business activity. Additionally, the Employment Index and the Prices Paid Index of the PMI survey dropped to 46.1 and 56.3, respectively.
According to the CME FedWatch Tool, the probability of a Federal Reserve rate cut declined to 27% from 32% before Wednesday's data releases.
Financial markets in the US will remain closed in observance of the Independence Day holiday on Thursday. Hence, EUR/USD's action could remain subdued. On Friday, the Bureau of Labor Statistics will release June jobs report, which will include Nonfarm Payrolls, Unemployment Rate and wage inflation figures.
EUR/USD Technical Analysis
EUR/USD climbed above 1.0800 on Wednesday, where the 100-day and the 50-day Simple Moving Averages (SMA) converge, but failed to make a daily close this level. Once 1.0800 is confirmed as support, technical buyers could remain interested. In this scenario, 1.0840 (Fibonacci 23.6% retracement of the latest uptrend) could be seen as interim resistance before 1.0900 (psychological level, static level).
In case 1.0800 stays intact as resistance, 1.0760 (Fibonacci 50% retracement) and 1.0730-1.0740 (Fibonacci 61.8% retracement, 20-day SMA) could be seen as support levels.
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.
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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.
