EUR/USD Forecast: Euro buyers hesitate as focus shifts to US data
- EUR/USD trades slightly below 1.0350 after closing in negative territory on Tuesday.
- The technical outlook highlights buyers' hesitancy in the near term.
- Investors await employment-related US data and FOMC Minutes.
Following Monday's upsurge, EUR/USD reversed its direction on Tuesday and closed in negative territory. The pair stays relatively quiet below 1.0350 in the European morning on Wednesday.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 0.12% | 0.13% | 0.03% | 0.13% | 0.13% | 0.12% | |
| EUR | -0.11% | 0.01% | 0.00% | -0.08% | 0.03% | 0.03% | 0.02% | |
| GBP | -0.12% | -0.01% | 0.02% | -0.09% | 0.02% | 0.02% | 0.00% | |
| JPY | -0.13% | 0.00% | -0.02% | -0.10% | 0.00% | -0.01% | -0.00% | |
| CAD | -0.03% | 0.08% | 0.09% | 0.10% | 0.10% | 0.10% | 0.09% | |
| AUD | -0.13% | -0.03% | -0.02% | -0.01% | -0.10% | -0.00% | -0.01% | |
| NZD | -0.13% | -0.03% | -0.02% | 0.00% | -0.10% | 0.00% | -0.01% | |
| CHF | -0.12% | -0.02% | -0.01% | 0.00% | -0.09% | 0.01% | 0.00% |
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 negative shift seen in risk mood and upbeat macroeconomic data releases on Tuesday, forcing EUR/USD to push lower. The ISM Services PMI improved to 54.1 in December from 52.1 in November, pointing to an ongoing expansion in the services sector's activity at an accelerating pace. Additionally, JOLTS Job Openings rose to 8.09 million in November from 7.84 million in October. Both of these figures came in better than analysts' estimates.
On Wednesday, ADP Employment Change data from the US will be watched closely by investors. The market expectation is for private sector payrolls to rise 140,000 in December following the 146,000 increase recorded in November. A reading above 150,000 could support the USD, while a disappointing print below 130,000 could have the opposite effect on the currency's valuation.
Later in the American session, the Federal Reserve will publish the minutes of the December policy meeting. Unless there is a dovish surprise in the publication, the USD is likely to stay resilient against its rivals.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour retreated slightly below 50, reflecting buyers' hesitancy. Additionally, EUR/USD closed the last three 4-hour candles below the 20-period and the 50-period Simple Moving Averages (SMA).
On the downside, 1.0320 (Fibonacci 23.66% retracement level of the latest downtrend) aligns as first support before 1.0300 (round level, static level) and 1.0240 (end-point of the downtrend). Looking north, resistances could be spotted at 1.0370 (50-period SMA, Fibonacci 38.2% retracement), 1.0400 (100-period SMA) and 1.0420 (Fibonacci 50% retracement).
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.
