EUR/USD Forecast: Euro could test 1.1000 on an upbeat NFP reading
- EUR/USD fluctuates in a tight channel above 1.1000 on Friday.
- The technical picture highlights a bearish stance in the near term.
- September employment data from the US could trigger the next big action in the pair.
EUR/USD extended its slide into a fifth consecutive day on Thursday and touched its weakest level in three weeks below 1.1010. The pair struggles to stage a rebound early Friday as investors refrain from betting against the US Dollar (USD) ahead of the key September labor market data.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.25% | 1.61% | 2.90% | 0.37% | 0.92% | 2.19% | 1.29% | |
| EUR | -1.25% | 0.37% | 1.63% | -0.84% | -0.26% | 0.97% | 0.12% | |
| GBP | -1.61% | -0.37% | 1.37% | -1.21% | -0.63% | 0.59% | -0.25% | |
| JPY | -2.90% | -1.63% | -1.37% | -2.40% | -1.97% | -0.65% | -1.51% | |
| CAD | -0.37% | 0.84% | 1.21% | 2.40% | 0.60% | 1.82% | 0.97% | |
| AUD | -0.92% | 0.26% | 0.63% | 1.97% | -0.60% | 1.23% | 0.38% | |
| NZD | -2.19% | -0.97% | -0.59% | 0.65% | -1.82% | -1.23% | -0.86% | |
| CHF | -1.29% | -0.12% | 0.25% | 1.51% | -0.97% | -0.38% | 0.86% |
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 Thursday, the data from the US showed that the ISM Services PMI improved to 54.9 in September from 51.5 in August. This reading surpassed the market expectation of 51.7 and showed an acceleration in the service sector's pace of growth, supporting the USD and not allowing EUR/USD to gain traction.
Nonfarm Payrolls (NFP) in the US are forecast to rise by 140,000 in September, following the 142,000 increase recorded in August. In case the NFP reading surprises to the upside by arriving at or above 160,000, the immediate reaction could boost the USD and trigger another leg lower in EUR/USD. On the flip side, a disappointing print near or below 100,000 could open the door for a USD selloff and help EUR/USD a portion of its weekly losses heading into the weekend.
If the data arrives near the market expectation, the risk perception could drive EUR/USD's action in the American trading hours. A risk rally fuelled by a bullish opening in Wall Street's main indexes could force the USD to weaken against its major rivals.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays above 30, suggesting that EUR/USD has more room on the downside before turning technically oversold.
Looking south, 1.1000 (Fibonacci 50% retracement of the latest uptrend) could be seen as next support before 1.0940 (Fibonacci 61.8% retracement) and 1.0900 (round level). On the upside, 1.1040 (Fibonacci 38.2% retracement) aligns as first resistance ahead of 1.1100, where the 100-period and the 200-period Simple Moving Averages (SMA) meet the Fibonacci 23.6% retracement, and 1.1150 (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.
