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EUR/USD Forecast: Euro bulls struggle to retain control

  • EUR/USD trades in negative territory below 1.1650 on Friday.
  • The near-term technical outlook points to a loss of bullish momentum.
  • The US economic calendar will not feature any high-impact data releases.

EUR/USD stays under modest bearish pressure and trades below 1.1650 in the European session on Friday, after closing virtually unchanged on Thursday. The pair's near-term technical outlook highlights buyers' hesitancy.

Euro PRICE Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.27%0.00%0.37%-0.12%0.00%-0.07%0.26%
EUR-0.27%-0.24%0.15%-0.36%-0.22%-0.24%0.00%
GBP-0.00%0.24%0.40%-0.12%-0.07%0.13%0.18%
JPY-0.37%-0.15%-0.40%-0.48%-0.43%-0.41%-0.09%
CAD0.12%0.36%0.12%0.48%0.14%0.23%0.34%
AUD-0.00%0.22%0.07%0.43%-0.14%0.08%0.19%
NZD0.07%0.24%-0.13%0.41%-0.23%-0.08%0.18%
CHF-0.26%0.00%-0.18%0.09%-0.34%-0.19%-0.18%

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) struggled to find demand on Thursday but EUR/USD found it difficult to gather bullish momentum. The sharp decline seen in the EUR/GBP cross, following the Bank of England's (BoE) decision to cut the policy rate by a slim majority, showed that Pound Sterling captured capital outflows out of the Euro. Early Friday, EUR/GBP continues to stretch lower and loses about 0.3% on the day after falling 0.6% on Thursday, not allowing the Euro to gather strength.

The US economic calendar will not offer any macroeconomic data releases that could drive the USD's valuation heading into the weekend. Hence, investors could pay close attention to comments from Federal Reserve officials and the risk perception.

At the time of press, US stock index futures were up between 0.2% and 0.3% on the day. A bullish action in Wall Street after the opening bell could limit the USD's gains and help EUR/USD find support. On the flip side, the pair could stay on the back foot in case markets adopt a cautious stance in the second half of the day.

EUR/USD Technical Analysis

EUR/USD failed to stabilize above the 200-period Simple Moving Average (SMA) on the 4-hour chart and the Relative Strength Index (RSI) indicator retreated below 60, reflecting a loss of bullish momentum.

On the downside, 1.1620 (100-period SMA) aligns as the first support level before 1.1540-1.1550 (Fibonacci 38.2% retracement of the latest uptrend, 50-period SMA) and 1.1500 (static level, round level). Looking north, resistance levels could be spotted at 1.1650-1.1660 (Fibonacci 23.6% retracement, 200-period SMA), 1.1700 (static level, round level) and 1.1760 (static level).

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.

Author

Eren Sengezer

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.

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