EUR/USD Forecast: Euro finds it difficult to gather bullish momentum
- EUR/USD trades in a tight range slightly below 1.0900 early Monday.
- Market reaction to US politics remain subdued at the beginning of the week.
- The pair could stretch lower if 1.0880 support fails.
After closing the last two days of the previous week in negative territory, EUR/USD seems to have entered into a consolidation phase slightly below 1.0900 early Monday. The pair's technical outlook points to a lack of buyer interest in the near term.
Euro PRICE Last 7 days
The table below shows the percentage change of Euro (EUR) against listed major currencies last 7 days. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.17% | 0.48% | -0.82% | 0.71% | 1.81% | 1.84% | -0.75% | |
| EUR | -0.17% | 0.34% | -0.80% | 0.72% | 1.68% | 1.85% | -0.73% | |
| GBP | -0.48% | -0.34% | -1.05% | 0.37% | 1.33% | 1.46% | -1.08% | |
| JPY | 0.82% | 0.80% | 1.05% | 1.53% | 2.42% | 2.63% | -0.13% | |
| CAD | -0.71% | -0.72% | -0.37% | -1.53% | 1.03% | 1.13% | -1.46% | |
| AUD | -1.81% | -1.68% | -1.33% | -2.42% | -1.03% | 0.18% | -2.37% | |
| NZD | -1.84% | -1.85% | -1.46% | -2.63% | -1.13% | -0.18% | -2.55% | |
| CHF | 0.75% | 0.73% | 1.08% | 0.13% | 1.46% | 2.37% | 2.55% |
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) benefited from the souring risk mood in the second half of last week and caused EUR/USD to turn south. Additionally, several European Central Bank (ECB) officials hinted at another rate reduction in September on Friday, making it difficult for the Euro to gather strength.
Over the weekend, US President Joe Biden announced that he will no longer run for President at the upcoming election and endorsed Vice President Kamala Harris to be the new nominee. Nevertheless, markets showed little to no reaction to this development.
In the European morning, US stock index futures trade modestly higher on the day. Investors, however, could refrain from taking large positions ahead of Tesla and Google's second-quarter earnings figures, which will be released after the closing bell on Tuesday.
The US economic docket will not feature any high-tier data releases on Monday. Later in the week, S&P Global PMI data from Germany, the Eurozone and the US will be watched closely by market participants. On Thursday, the US Bureau of Economic Analysis will release its first estimate of the second-quarter Gross Domestic Product (GDP) growth ahead of Friday's Personal Consumption Expenditures (PCE) Price Index.
EUR/USD Technical Analysis
EUR/USD failed to return within the ascending regression channel coming from late June after testing the lower limit at the beginning of the week. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50, reflecting a lack of buyer interest.
On the downside, 1.0880 (Fibonacci 23.6% retracement of the latest uptrend) aligns as immediate support. If EUR/USD falls below that level and starts using it as resistance, 1.0840-1.0835 (Fibonacci 38.2% retracement, 100-period Simple Moving Average) could be seen as next support before 1.0810-1.0800 (Fibonacci 50% retracement, static level).
In case EUR/USD manages to rise above 1.0900-1.0910 (lower limit of the ascending channel, 20-period Simple Moving Average) and stabilize there, technical buyers could take action. In this scenario, 1.0940 (mid-point of the channel, static level) could act as strong resistance before 1.1000 (static level, psychological level) could be set as the next bullish target.
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.
