EUR/USD Forecast: Euro corrects lower but bullish bias remains intact
- EUR/USD corrects lower after rising to its highest level since mid-October.
- The bullish bias remains intact in the near-term technical outlook.
- The US economic calendar will feature weekly Initial Jobless Claims data.
EUR/USD extended its weekly uptrend on Wednesday and touched its highest level since October 17 near 1.1680. The pair corrects lower early Thursday and trades at around 1.1650.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.53% | -0.75% | -0.56% | -0.09% | -0.97% | -0.66% | -0.32% | |
| EUR | 0.53% | -0.23% | -0.02% | 0.44% | -0.44% | -0.14% | 0.20% | |
| GBP | 0.75% | 0.23% | 0.46% | 0.67% | -0.22% | 0.09% | 0.43% | |
| JPY | 0.56% | 0.02% | -0.46% | 0.45% | -0.44% | -0.13% | 0.21% | |
| CAD | 0.09% | -0.44% | -0.67% | -0.45% | -0.92% | -0.56% | -0.24% | |
| AUD | 0.97% | 0.44% | 0.22% | 0.44% | 0.92% | 0.31% | 0.65% | |
| NZD | 0.66% | 0.14% | -0.09% | 0.13% | 0.56% | -0.31% | 0.34% | |
| CHF | 0.32% | -0.20% | -0.43% | -0.21% | 0.24% | -0.65% | -0.34% |
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) came under heavy selling pressure in the American session on Wednesday after the latest data releases highlighted worsening conditions in the labor market.
The Automatic Data Processing (ADP) reported that private sector employment in the US declined by 32,000 in November. This print followed the 47,000 increase recorded in October and came in worse than the market expectation of 5,000. Other data from the US showed that the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) edged higher to 52.6 in November from 52.4 in October. However, the Employment Index of the PMI survey came in at 48.9, reflecting an ongoing contraction in service sector payrolls.
In the second half of the day, the US Department of Labor will publish the weekly Initial Jobless Claims data. Markets expect the number of first-time applications for unemployment benefits to edge higher to 220,000 from 216,000 in the previous week. A positive surprise, with a reading near or below 200,000, could help the USD stay resilient against its rivals and make it difficult for EUR/USD to regain its traction. Conversely, a print above the market expectation could cause the USD to remain weak and allow EUR/USD to build on its weekly advance.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) rises to 1.1631, positioned above the 50-, 100- and 200-period SMAs at 1.1594, 1.1586 and 1.1584. Shorter and medium-term averages edge higher while the 200-period remains broadly flat, with price holding above all of them. The Relative Strength Index (RSI) stands at 62, firm without overbought conditions, supporting a positive bias.
The rising trend line from 1.1498 underpins the bullish tone, offering support near 1.1641. Measured from the 1.1885 high to the 1.1473 low, the 38.2% retracement at 1.1630 and the 20-period SMA form a strong support area, while the 50% retracement at 1.1679 caps the immediate upside. A break above 1.1679 could open the door for a leg higher toward 1.1730 (Fibonacci 61.8% retracement), whereas a slip below 1.1641 would put 1.1630 and 1.1584 (200-period SMA) back in play.
(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.
