EUR/USD Forecast: Euro could stay under pressure if 1.1580 support fails
- EUR/USD trades near 1.1600 in the European session on Wednesday.
- The next key support level for the pair aligns at 1.1580.
- The economic calendar will not offer any high-impact data releases.
EUR/USD struggles to stage a rebound early Wednesday and fluctuates in a tight channel at around 1.1600 after posting losses for three consecutive trading days. The pair's technical outlook suggests that the bearish stance remains unchanged in the short term.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.63% | 0.87% | 0.79% | -0.07% | -0.05% | -0.15% | 0.55% | |
| EUR | -0.63% | 0.24% | 0.26% | -0.69% | -0.57% | -0.84% | -0.06% | |
| GBP | -0.87% | -0.24% | -0.24% | -0.93% | -0.81% | -1.08% | -0.32% | |
| JPY | -0.79% | -0.26% | 0.24% | -0.90% | -0.87% | -1.02% | -0.34% | |
| CAD | 0.07% | 0.69% | 0.93% | 0.90% | 0.06% | -0.15% | 0.62% | |
| AUD | 0.05% | 0.57% | 0.81% | 0.87% | -0.06% | -0.27% | 0.52% | |
| NZD | 0.15% | 0.84% | 1.08% | 1.02% | 0.15% | 0.27% | 0.77% | |
| CHF | -0.55% | 0.06% | 0.32% | 0.34% | -0.62% | -0.52% | -0.77% |
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 broad-based US Dollar (USD) strength caused EUR/USD to stay on the back foot on Tuesday. Easing fears over a deepening US-China trade conflict helped the sentiment surrounding the USD improve.
Meanwhile, investors might also be turning optimistic about the reopening of the US government soon. Following a meeting at the White House with President Donald Trump, some Republican senators said that Trump wants to end the government shutdown and that he is willing to talk to Democrats about it.
Later in the session, European Central Bank (ECB) President Christine Lagarde will deliver a keynote speech at Frankfurt Finance & Future Summit in Frankfurt. This will be Lagarde's last public appearance before the ECB's blackout period starts on Thursday. Nevertheless, Lagarde is unlikely to offer any comments that could significantly influence the market pricing of the ECB's policy outlook.
In the absence of high-tier data releases, the risk perception could drive EUR/USD's action in the second half of the day. At the time of press, US stock index futures were trading mixed. In case the market mood remains cautious in the American session, the pair could find it difficult to stage a rebound.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40 but it's yet to drop below 30, suggesting that EUR/USD has more room on the downside before turning technically oversold.
The Fibonacci 61.8% retracement of the latest uptrend aligns as a key support level at 1.1580. If EUR/USD falls below this level, technical sellers could remain interested. In this scenario, 1.1550 (static level) could be seen as an interim support level before 1.1500 (Fibonacci 78.6% retracement).
Looking north, resistance levels could be seen at 1.1650 (100-day Simple Moving Average (SMA)), 1.1700 (50-day SMA) and 1.1765 (Fibonacci 23.6% 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.
