EUR/USD Forecast: Euro finds it difficult to attract bulls
- EUR/USD holds steady above 1.0500 in the European session on Thursday.
- The near-term technical outlook points to a lack of bullish momentum.
- The 20-day SMA aligns as next immediate resistance at 1.0550.
EUR/USD met resistance near 1.0550 on Wednesday but managed to close the day above 1.0500. The pair clings to small daily gains and the technical outlook is yet to point to a buildup of bullish momentum.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.52% | 0.17% | 0.33% | 0.49% | 1.14% | 0.92% | 0.52% | |
| EUR | -0.52% | -0.39% | -0.17% | -0.01% | 0.71% | 0.42% | 0.02% | |
| GBP | -0.17% | 0.39% | 0.17% | 0.37% | 1.10% | 0.81% | 0.38% | |
| JPY | -0.33% | 0.17% | -0.17% | 0.17% | 0.84% | 0.63% | 0.12% | |
| CAD | -0.49% | 0.01% | -0.37% | -0.17% | 0.81% | 0.44% | -0.00% | |
| AUD | -1.14% | -0.71% | -1.10% | -0.84% | -0.81% | -0.29% | -0.75% | |
| NZD | -0.92% | -0.42% | -0.81% | -0.63% | -0.44% | 0.29% | -0.41% | |
| CHF | -0.52% | -0.02% | -0.38% | -0.12% | 0.00% | 0.75% | 0.41% |
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 Dollar (USD) struggled to gather strength following the disappointing macroeconomic data releases on Wednesday and helped EUR/USD hold its ground. The political uncertainty in France, however, limited the Euro's gains. French Prime Minister Michel Barnier is expected to submit his resignation on Thursday after his government lost the no-confidence vote in parliament.
In the European session, the cautious market stance doesn't allow EUR/USD to stretch higher. In the second half of the day, the US economic calendar will feature weekly Initial Jobless Claims data. A reading below 200,000 could boost the USD with the immediate reaction, while a print near 250,000 could have the opposite impact on the currency's valuation.
Nevertheless, investors could refrain from taking large positions ahead of Friday's highly-anticipated November labor market report from the US.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50, reflecting a lack of bullish momentum.
Additionally, EUR/USD is yet to clear the 1.0520-1.030 resistance, where the Fibonacci 23.6% retracement of the latest downtrend and the 100-period Simple Moving Average (SMA) are located. In case EUR/USD stabilizes above this area, the 20-day Simple Moving Average (SMA) could act as next resistance at 1.0550 ahead of 1.0600 (Fibonacci 38.2% retracement).
On the downside, 1.0500 (static level) aligns as interim support before 1.0440 (static level) and 1.0400 (end-point of the downtrend, 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.
