EUR/USD Forecast: Euro could gather bullish momentum on a weak NFP print
- EUR/USD trades in positive territory above 1.1650 in the European session on Friday.
- August Nonfarm Payrolls data from the US could trigger a strong reaction.
- The technical outlook points to a bullish tilt in the near term.
EUR/USD gains traction and climbs above 1.1650 in the European session on Friday after posting marginal losses on Thursday. The pair's near-term technical outlook hints at a bullish tilt as investors gear up for the release of the August employment report from 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 strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.23% | -0.25% | -0.12% | -0.19% | -0.50% | -0.55% | -0.24% | |
| EUR | 0.23% | -0.01% | 0.03% | 0.04% | -0.19% | -0.30% | -0.02% | |
| GBP | 0.25% | 0.00% | 0.08% | 0.05% | -0.17% | -0.30% | 0.03% | |
| JPY | 0.12% | -0.03% | -0.08% | 0.00% | -0.30% | -0.39% | 0.05% | |
| CAD | 0.19% | -0.04% | -0.05% | -0.00% | -0.26% | -0.35% | -0.03% | |
| AUD | 0.50% | 0.19% | 0.17% | 0.30% | 0.26% | -0.13% | 0.21% | |
| NZD | 0.55% | 0.30% | 0.30% | 0.39% | 0.35% | 0.13% | 0.33% | |
| CHF | 0.24% | 0.02% | -0.03% | -0.05% | 0.03% | -0.21% | -0.33% |
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 mixed macroeconomic data releases from the US made it difficult for the US Dollar (USD) to outperform its rivals in the American session on Thursday, helping EUR/USD hold its ground.
The Institute for Supply Management (ISM) reported that Services Purchasing Managers' Index (PMI) improved to 52 in August from 50.1 in July, reflecting an ongoing expansion in the service sector's business activity at an accelerating pace. This print came in better than the market expectation of 51. On a negative note, the Automatic Data Processing (ADP) reported that private sector payrolls rose by 54,000 in August, falling short of analysts' estimate of 65,000.
In the second half of the day, the Bureau of Labor Statistics will publish the employment report for August. Nonfarm Payrolls (NFP) are forecast to rise by 75,000 and the Unemployment Rate is seen edging higher to 4.3%. A disappointing NFP figure of 50K or lower could weigh on the USD heading into the weekend and help EUR/USD continue to push higher.
On the other hand, a positive surprise, with a reading over 100K, could ease fears over worsening conditions in the labor market and support the USD.
According to the CME FedWatch Tool, markets are nearly fully pricing in a 25 basis-points (bps) rate cut in September and see about a 55% chance of one more 25 bps cut in October. The market positioning suggests that the USD is facing a two-way risk.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 60 and EUR/USD trades above the 20-day, 50-day, 20-period, 50-period, 100-period and 200-period Simple Moving Averages (SMAs), which form a pivot area at 1.1640-1.1660, pointing to a bullish shift in the short-term outlook.
On the upside, 1.1700 (round level, static level) could be seen as the next resistance level before 1.1740 (static level) and 1.1800 (static level, round level). In case EUR/USD drops below the 1.1640-1.1660 area and starts using it as resistance on a strong NFP print, technical sellers could show interest. In this scenario, 1.1600 (static level, round level) could be seen as the next support level before 1.1540 (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.
