EUR/USD Forecast: Euro faces key support area at 1.1280-1.1270
- EUR/USD holds above 1.1300 after dropping below this level earlier in the day.
- The pair could extend its weekly slide in case 1.1280-1.1270 support area fails.
- US economic calendar will feature weekly Initial Jobless Claims and April ISM Manufacturing PMI data.
EUR/USD came under bearish pressure in the American session on Wednesday and closed the second consecutive day in negative territory. After touching a two-week-low below 1.1290 early Thursday, the pair managed to stabilize above 1.1300. Nevertheless, the technical outlook points to a lack of buyer interest in the near 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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.32% | -0.11% | 0.39% | -0.41% | 0.13% | 0.45% | -0.44% | |
| EUR | -0.32% | -0.49% | 0.07% | -0.74% | -0.29% | 0.12% | -0.78% | |
| GBP | 0.11% | 0.49% | 0.54% | -0.24% | 0.18% | 0.60% | -0.28% | |
| JPY | -0.39% | -0.07% | -0.54% | -0.77% | -0.22% | -1.34% | -0.57% | |
| CAD | 0.41% | 0.74% | 0.24% | 0.77% | 0.42% | 0.86% | -0.03% | |
| AUD | -0.13% | 0.29% | -0.18% | 0.22% | -0.42% | 0.42% | -0.47% | |
| NZD | -0.45% | -0.12% | -0.60% | 1.34% | -0.86% | -0.42% | -0.88% | |
| CHF | 0.44% | 0.78% | 0.28% | 0.57% | 0.03% | 0.47% | 0.88% |
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 US Bureau of Economic Analysis' first estimate showed on Wednesday that the US' Gross Domestic Product (GDP) contracted at an annual rate of 0.3% in the first quarter. Despite the disappointing growth data, however, the US Dollar (USD) held its ground as the core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, rose 2.6% on a yearly basis in March, remaining well above the Fed's target of 2%.
In the second half of the day, the US Department of Labor will publish weekly Initial Jobless Claims data. Additionally, the ISM will release the Manufacturing Purchasing Managers' Index (PMI) for April.
The headline PMI is forecast to remain in contraction territory below 50. The Prices Paid Index, the inflation component of the PMI survey, is expected to rise to 70.3 from 69.4. A bigger-than-forecast increase in this sub-index could support the USD even if the main PMI reading comes is weaker than expected.
Still, investors could refrain from taking large positions ahead of Friday's highly-anticipated April employment report, limiting EUR/USD's fluctuations in the American session.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 and EUR/USD closed the last four 4-hour candles below the 100-period Simple Moving Average (SMA), reflecting a bearish bias.
The 20-day SMA and the Fibonacci 38.2% retracement level of the latest uptrend form a critical support area at 1.1280-1.1270. In case EUR/USD falls below this support and fails to reclaim it, technical sellers could take action. In this scenario, 1.1175 (Fibonacci 50% retracement) could be set as the next bearish target ahead of 1.1080 (Fibonacci 61.8% retracement).
On the upside, 1.1350 (100-period SMA) could be seen as first resistance before 1.1380 (Fibonacci 23.6% retracement) and 1.1430 (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.
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.
