EUR/USD Forecast: Euro finds support but looks vulnerable
- EUR/USD holds above 1.1600 following Tuesday's sharp decline.
- The technical outlook doesn't yet hint at an extended recovery.
- The US economic calendar will feature JOLTS Job Openings data.
EUR/USD remained under heavy bearish pressure and lost more than 0.5% on Tuesday. After coming within a touching distance of 1.1600, the pair found support and was last seen trading marginally higher on the day near 1.1650.
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 | 0.37% | 0.80% | 1.14% | 0.44% | 0.30% | 0.44% | 0.62% | |
| EUR | -0.37% | 0.42% | 0.71% | 0.07% | -0.07% | 0.06% | 0.24% | |
| GBP | -0.80% | -0.42% | 0.18% | -0.36% | -0.50% | -0.36% | -0.14% | |
| JPY | -1.14% | -0.71% | -0.18% | -0.63% | -0.83% | -0.67% | -0.50% | |
| CAD | -0.44% | -0.07% | 0.36% | 0.63% | -0.13% | 0.00% | 0.22% | |
| AUD | -0.30% | 0.07% | 0.50% | 0.83% | 0.13% | 0.14% | 0.36% | |
| NZD | -0.44% | -0.06% | 0.36% | 0.67% | 0.00% | -0.14% | 0.22% | |
| CHF | -0.62% | -0.24% | 0.14% | 0.50% | -0.22% | -0.36% | -0.22% |
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) gathered strength on Tuesday as the selloff seen in global bond markets, especially in long-dated UK gilts, triggered a flight to safety.
Early Wednesday, improving risk mood limits the USD's gains and helps EUR/USD rebound. Nevertheless, unless there is a sharp correction in long-dated global bond yields, investors could opt to stay away from risk-sensitive assets, capping the pair's upside.
In the second half of the day, the US economic calendar will feature JOLTS Job Openings data for July. In case there is a significant decline in this data, with a reading at or below 7 million, the USD could come under pressure with the immediate reaction and allow EUR/USD to stretch higher. On the flip side, a print near or above the market expectation of 7.4 million is unlikely to cause a market reaction.
Meanwhile, investors will pay close attention to the action in Wall Street. In the European session, US stock index futures trade mixed. In case risk flows return to markets and main equity indexes in the US gather bullish momentum, EUR/USD could extend its recovery heading into the end of the day.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 and EUR/USD continues to trade below the 20-day and the 50-day Simple Moving Averages (SMA), currently aligning in the 1.1660-1.1670 region.
In case EUR/USD clears the 1.1660-1.1670 resistance area, sellers could hesitate. In this scenario, 1.1700 (round level, static level) could be seen as the next resistance level before 1.1740 (static level). Looking south, the immediate support level could be spotted at 1.1640 (200-period SMA) ahead of 1.1600 (static level, round level) and 1.1540 (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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
