EUR/USD Forecast: Euro correction could remain shallow
- EUR/USD trades in negative territory below 1.1750 in the second half of the day.
- The technical outlook suggests that the bullish bias remains intact.
- Markets await news on EU-US trade talks ahead of the ECB meeting.
Following a bullish opening to the week, EUR/USD corrects lower on Wednesday and trades below 1.1750. Investors await fresh developments on trade negotiations between the European Union (EU) and the United States (US).
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.26% | -0.02% | -0.09% | -0.06% | -0.59% | -0.79% | 0.12% | |
| EUR | -0.26% | -0.28% | -0.34% | -0.32% | -0.87% | -1.05% | -0.14% | |
| GBP | 0.02% | 0.28% | -0.04% | -0.04% | -0.59% | -0.76% | 0.19% | |
| JPY | 0.09% | 0.34% | 0.04% | 0.03% | -0.48% | -0.60% | 0.22% | |
| CAD | 0.06% | 0.32% | 0.04% | -0.03% | -0.50% | -0.52% | 0.21% | |
| AUD | 0.59% | 0.87% | 0.59% | 0.48% | 0.50% | -0.17% | 0.78% | |
| NZD | 0.79% | 1.05% | 0.76% | 0.60% | 0.52% | 0.17% | 0.96% | |
| CHF | -0.12% | 0.14% | -0.19% | -0.22% | -0.21% | -0.78% | -0.96% |
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) holds its ground midweek and causes EUR/USD to stretch lower as market fears over an economic downturn ease on the announcement of a trade deal with Japan. Additionally, US President Donald Trump noted that representatives from the EU will be in the US on Wednesday for the next round of trade negotiations. After losing about 1% in a two-day decline, the USD Index, which measures the USD's valuation against a basket of six major currencies, clings to modest gains at around 97.50.
In case the EU and the US come to terms on trade, the immediate market reaction could be supportive for the USD. However, the currency could have a difficult time gathering further strength if risk flows continue to dominate the action in financial markets in the near term. At the time of press, US stock index futures were up between 0.2% and 0.5%, pointing to a bullish opening in Wall Street.
On Thursday, the European Central Bank (ECB) will announce monetary policy decisions. Following June's rate cut, the ECB is widely expected to keep its key rates unchanged after the July meeting.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 60 but EUR/USD holds comfortably above the 100-period Simple Moving Average (SMA), suggesting that the bullish stance remains despite losing momentum.
Looking south, the first support level could be seen at 1.1700 (100-period SMA) ahead of 1.1650 (Fibonacci 23.6% retracement of the latest uptrend) and 1.1630 (200-period SMA). On the upside, resistance levels could be spotted at 1.1760 (static level), 1.1800 (static level, round level) and 1.1830 (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.
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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.
