EUR/USD Forecast: Euro bulls struggle to retain control
- EUR/USD retreats below 1.1750 after closing in positive territory on Thursday.
- Investors await January PMI data for the Eurozone and the US.
- The near-term technical outlook remains bullish but there is a loss of momentum.
Following Wednesday's decline, EUR/USD regained its traction on Thursday and closed in positive territory. The pair finds it difficult to hold its ground in the European session on Friday and trades below 1.1750.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.09% | 0.02% | 0.04% | -0.05% | 0.16% | 0.15% | |
| EUR | -0.10% | -0.01% | -0.07% | -0.05% | -0.14% | 0.06% | 0.05% | |
| GBP | -0.09% | 0.00% | -0.06% | -0.04% | -0.13% | 0.07% | 0.06% | |
| JPY | -0.02% | 0.07% | 0.06% | 0.04% | -0.07% | 0.13% | 0.13% | |
| CAD | -0.04% | 0.05% | 0.04% | -0.04% | -0.11% | 0.10% | 0.10% | |
| AUD | 0.05% | 0.14% | 0.13% | 0.07% | 0.11% | 0.20% | 0.20% | |
| NZD | -0.16% | -0.06% | -0.07% | -0.13% | -0.10% | -0.20% | -0.01% | |
| CHF | -0.15% | -0.05% | -0.06% | -0.13% | -0.10% | -0.20% | 0.01% |
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 risk-positive market atmosphere, on easing tensions between the United States (US) and the European Union (EU), caused the US Dollar (USD) to weaken against its peers Thursday. Meanwhile, the data from the US showed that the weekly Initial Jobless Claims edged higher to 200,000 from 199,000 in the previous week. Additionally, the US Bureau of Economic Analysis announced that they revised the annualized Gross Domestic Product (GDP) growth for the third-quarter to 4.4% from 4.3% in the initial estimate.
The HCOB's preliminary Purchasing Managers' Index (PMI) report for January showed on Friday that the business activity in the private sector expanded at a strenghtening pace, with the Composite PMI rising to 52.5 from 51.3.
Later in the day, PMI data for the Eurozone and the US will be watched closely by market participants. In case the Eurozone PMI figures surprise to the upside, the Euro (EUR) could find a foothold. On the other hand, a reading below 50 in either the Manufacturing or the Services PMI in the US could cause the USD to come under pressure heading into the weekend and help the pair stage a rebound.
In the meantime, US stock index futures trade flat in the European session on Friday. If markets turn risk-averse with a bearish opening in Wall Street, the USD could preserve its strength in the American session and cause EUR/USD to stretch lower.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1734. The 20-period Simple Moving Average (SMA) rises above the 100- and 200-period SMAs, while the 50-period SMA remains below them, framing a mixed but improving bias as price holds above all four averages.
The Relative Strength Index (14) prints 61, above the midline, reinforcing bullish momentum. Measured from the 1.1800 high to the 1.1592 low, price trades above the 61.8% retracement at 1.1721, suggesting the prior bearish leg is losing traction.
Upside would face a cap at the 78.6% retracement at 1.1756, and a close above it could open the way toward the 1.1800 area. On dips, initial support sits at the 20 SMA at 1.1717, and a break below it would expose the 200 SMA at 1.1705 ahead of 1.1680 (100-period SMA).
(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.
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