EUR/USD Forecast: Euro could build on weekly gains on a soft NFP print
- EUR/USD trades above 1.1400 in the European session on Friday.
- The ECB cut key rates by 25 bps after the June meeting, as expected.
- Nonfarm Payrolls in the US are forecast to rise by 130,000 in May.
EUR/USD retreats after closing in positive territory on Thursday but manages to hold above 1.1400 on Friday. Although the pair's technical outlook points to a loss of bullish momentum, buyers could remain interested in case the US employment data disappoint.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.67% | -0.56% | 0.09% | -0.47% | -0.84% | -1.07% | -0.24% | |
| EUR | 0.67% | 0.10% | 0.76% | 0.19% | -0.16% | -0.43% | 0.44% | |
| GBP | 0.56% | -0.10% | 0.68% | 0.10% | -0.26% | -0.52% | 0.34% | |
| JPY | -0.09% | -0.76% | -0.68% | -0.55% | -0.92% | -1.17% | -0.40% | |
| CAD | 0.47% | -0.19% | -0.10% | 0.55% | -0.37% | -0.62% | 0.23% | |
| AUD | 0.84% | 0.16% | 0.26% | 0.92% | 0.37% | -0.20% | 0.68% | |
| NZD | 1.07% | 0.43% | 0.52% | 1.17% | 0.62% | 0.20% | 0.87% | |
| CHF | 0.24% | -0.44% | -0.34% | 0.40% | -0.23% | -0.68% | -0.87% |
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).
EUR/USD gained traction and climbed to its highest level since late April near 1.1500 on Thursday. The European Central Bank (ECB) announced that it cut key rates by 25 basis points (bps) following the June policy meeting. While responding to questions in the post-meeting press conference, ECB President Christine Lagarde noted that they might be approaching the end of the current policy cycle. Markets took that as a sign that the ECB could be done with rate cuts and the Euro gathered strength against its rivals with the immediate reaction.
Nonfarm Payrolls (NFP) in the US are forecast to rise by 130,000 in May. On Thursday, the US Department of Labor reported that there were 247,000 first-time application for unemployment benefits in the week ending May 31, compared to the market expectation of 235,000. This reading weighed on the USD in the early American session.
In case the NFP data disappoint, with a reading below 100,000, the USD could come under renewed selling pressure and open the door for another leg higher in EUR/USD heading into the weekend.
Conversely, a positive NFP print of 170,000 or higher could revive expectations for a Federal Reserve policy hold in July and support the USD. According to the CME FedWatch Tool, markets are currently pricing in about a 32% probability of a 25 bps cut in July.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart declines toward 50, reflecting a lack of buyer interest.
On the upside, first resistance level could be seen at 1.1450 (static level) before 1.1500 (static level, round level) and 1.1575 (April 21 high). Looking south, supports align at 1.1380 (Fibonacci 23.6% retracement of the latest uptrend), 1.1320-1.1330 (100-period Simple Moving Average (SMA), 200-period SMA) and 1.1260 (Fibonacci 38.2% 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.
