EUR/USD Forecast: Euro could extend recovery once it clears 1.1100
- EUR/USD trades slightly below 1.1100 after closing in positive territory on Wednesday.
- Employment-related US data could trigger the next big action in the pair.
- The technical outlook suggests that sellers stay on the sidelines.
EUR/USD fluctuates in a narrow range slightly below 1.1100 after closing in positive territory on Wednesday. Later in the day, employment-related macroeconomic data releases from the US could influence the US Dollar's (USD) valuation and drive the pair's action.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.41% | -0.21% | -1.68% | 0.18% | 0.64% | 0.76% | -0.32% | |
| EUR | 0.41% | 0.22% | -1.29% | 0.56% | 1.06% | 1.17% | 0.08% | |
| GBP | 0.21% | -0.22% | -1.51% | 0.34% | 0.82% | 0.97% | -0.16% | |
| JPY | 1.68% | 1.29% | 1.51% | 1.83% | 2.39% | 2.61% | 1.32% | |
| CAD | -0.18% | -0.56% | -0.34% | -1.83% | 0.51% | 0.58% | -0.49% | |
| AUD | -0.64% | -1.06% | -0.82% | -2.39% | -0.51% | 0.09% | -0.97% | |
| NZD | -0.76% | -1.17% | -0.97% | -2.61% | -0.58% | -0.09% | -1.07% | |
| CHF | 0.32% | -0.08% | 0.16% | -1.32% | 0.49% | 0.97% | 1.07% |
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).
On Wednesday, the USD came under selling pressure after the data published by the US Bureau of Labor Statistics showed that the number of job openings on the last business day of July stood at 7.67 million, down from 7.9 million in June and below the market expectation of 8.1 million.
Later in the day, the ADP Employment Change and the weekly Initial Jobless Claims data will be featured in the US economic docket.
Markets expect the private sector payrolls to rise 145,000 in August following the 122,000 increase recorded in July. A disappointing reading close to 100,000 could feed into concerns over worsening conditions in the labor market and trigger another bout of USD selloff ahead of Friday's August jobs report. On the other hand, a positive surprise, with a print at or above 150,000, could provide a boost to the USD and make it difficult for EUR/USD to build on Wednesday's gains.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 60 in the European session on Thursday, reflecting a buildup of bullish momentum. 1.1100 (50-period Simple Moving Average (SMA), Fibonacci 23.6% retracement of the latest uptrend) aligns as immediate resistance. In case the pair flips that level into support, 1.1160 (static level) could be seen as next hurdle ahead of 1.1200 (end-point of uptrend).
On the downside, first support is located at 1.1040 (Fibonacci 38.2% retracement) before 1.1000 (psychological level, Fibonacci 50% retracement).
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.
