EUR/USD Forecast: Euro faces next support at 1.0730
- EUR/USD holds steady near 1.0750 following Monday's decline.
- The pair could encounter next support level at 1.0730.
- Investors could refrain from taking large positions ahead of Wednesday's key events.
Results of the European Parliament election and the risk-averse market atmosphere made it difficult for the Euro (EUR) to find demand at the beginning of the week, with EUR/USD closing in negative territory for the second consecutive day on Monday. The pair holds steady at around 1.0750 on Tuesday as investors move to the sidelines ahead of Wednesday's key macroeconomic events.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.50% | -0.04% | 0.31% | 0.07% | -0.27% | -0.26% | -0.05% | |
| EUR | -0.50% | -0.20% | 0.08% | -0.17% | -0.50% | -0.51% | -0.28% | |
| GBP | 0.04% | 0.20% | 0.40% | 0.06% | -0.30% | -0.31% | -0.11% | |
| JPY | -0.31% | -0.08% | -0.40% | -0.25% | -0.67% | -0.70% | -0.34% | |
| CAD | -0.07% | 0.17% | -0.06% | 0.25% | -0.30% | -0.34% | -0.13% | |
| AUD | 0.27% | 0.50% | 0.30% | 0.67% | 0.30% | -0.01% | 0.19% | |
| NZD | 0.26% | 0.51% | 0.31% | 0.70% | 0.34% | 0.01% | 0.20% | |
| CHF | 0.05% | 0.28% | 0.11% | 0.34% | 0.13% | -0.19% | -0.20% |
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).
Early Tuesday, markets remain cautious, not allowing EUR/USD to stage a rebound. At the time of press, US stock index futures were down between 0.1% and 0.2%. In the absence of high-tier data releases, market participants are likely to pay close attention to changes in risk mood.
A bearish opening in Wall Street, followed by a sharp decline in major equity indexes could provide a boost to the US Dollar (USD) and weigh on the pair. Later in the American session, the US Treasury will hold a 10-year note auction. In the last auction that took place on May 8, the high-yield arrived at 4.48%, down from 4.56% in the previous auction. In case the high-yield comes in above 4.5%, the USD could stay resilient against its rivals.
Meanwhile, European Central Bank (ECB) policymaker Francois Villeroy de Galhau said on Tuesday that they have "significant leeway" to lower rates before exiting the restrictive policy, limiting Euro's upside.
On Wednesday, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for May. Later in the day, the Federal Reserve will announce monetary policy decisions and publish the revised Summary of Economic Projections, which will show how many rate cuts Fed policymakers foresee in 2024.
EUR/USD Technical Analysis
The Fibonacci 61.8% retracement of the latest uptrend aligns as immediate support at 1.0730 before 1.0700 (psychological level, static level) and 1.0670 (Fibonacci 78.6% retracement).
On the upside, 1.0790-1.0800 area, where the Fibonacci 38.2% retracement level meets the 100-day and the 200-day Simple Moving Averages (SMA), stays intact as key ahead of 1.0850 (static level, 100-period SMA on the 4-hour chart).
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.
