EUR/USD Forecast: Euro clings to bullish stance ahead of Fed
- EUR/USD holds above 1.1650 in the European session on Monday.
- The technical picture highlights a bullish stance in the near term.
- Investors could refrain from taking large positions ahead of the Fed meeting.
EUR/USD edges higher to start the week and trades in positive territory above 1.1650 in the European session. The technical outlook suggests that the bullish bias remains intact in the near term but the pair's volatility could remain weak ahead of the Federal Reserve's (Fed) last policy meeting of the year.
Euro Price This Month
The table below shows the percentage change of Euro (EUR) against listed major currencies this month. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.59% | -0.72% | -0.59% | -1.15% | -1.48% | -0.91% | -0.03% | |
| EUR | 0.59% | -0.12% | -0.02% | -0.55% | -0.89% | -0.32% | 0.56% | |
| GBP | 0.72% | 0.12% | 0.35% | -0.43% | -0.76% | -0.19% | 0.69% | |
| JPY | 0.59% | 0.02% | -0.35% | -0.54% | -0.89% | -0.31% | 0.57% | |
| CAD | 1.15% | 0.55% | 0.43% | 0.54% | -0.39% | 0.24% | 1.13% | |
| AUD | 1.48% | 0.89% | 0.76% | 0.89% | 0.39% | 0.58% | 1.45% | |
| NZD | 0.91% | 0.32% | 0.19% | 0.31% | -0.24% | -0.58% | 0.88% | |
| CHF | 0.03% | -0.56% | -0.69% | -0.57% | -1.13% | -1.45% | -0.88% |
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).
Heightened expectations for a 25 basis points (bps) rate cut and a dovish Fed outlook next year have been weighing on the US Dollar (USD) since the beginning of the month. According to the CME FedWatch Tool, markets are currently pricing in about an 88% probability of a rate cut this Wednesday.
Meanwhile, European Central Bank (ECB) board member Isabel Schnabel said on Monday that she is comfortable with investors betting that the ECB's next interest-rate move will be an increase. "The economy has been much more resilient than could have been expected," she added. These comments seem to be supporting the Euro (EUR).
The economic calendar will not feature any high-tier data releases on Monday. Hence, investors could opt to remain on the sidelines, making it difficult for EUR/USD to make a decisive move ahead of the Fed meeting.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) rises above the 50-, 100- and 200-period SMAs, signalling steady bullish momentum. All SMAs slope higher and price holds above them, reaffirming the bullish stance. Additionally, the 14-period Relative Strength Index (RSI) sits at 57 and is edging higher.
Measured from the 1.1885 high to the 1.1474 low, the 38.2% retracement at 1.1630 acts as initial support, which is reinforced by the ascending trend line, ahead of the 200-period SMA at 1.1585. On the upside, the 50% retracement at 1.1680 aligns as the first resistance level. In case EUR/USD manages to clear that hurdle, 1.1730 (Fibonacci 61.8% retracement) could be seen as the next resistance level.
(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.
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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.
