EUR/USD Forecast: Euro holds above strong support area
- EUR/USD fluctuates at around 1.0850 to begin the week.
- 1.0800 aligns as key support area for the pair.
- Investors could refrain from taking large positions ahead of this week's critical events.
EUR/USD moves sideways near 1.0850 in the European morning on Monday after closing the previous week in negative territory. Ahead of this week's key macroeconomic events, which include the Federal Reserve's (Fed) monetary policy decisions, Eurozone inflation data and US labor market report, the pair could stay in a consolidation phase.
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 weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | 0.48% | -2.41% | 0.86% | 2.10% | 2.22% | -0.37% | |
| EUR | -0.25% | 0.23% | -2.68% | 0.57% | 1.89% | 1.91% | -0.68% | |
| GBP | -0.48% | -0.23% | -3.00% | 0.33% | 1.66% | 1.67% | -0.92% | |
| JPY | 2.41% | 2.68% | 3.00% | 3.38% | 4.70% | 4.71% | 2.03% | |
| CAD | -0.86% | -0.57% | -0.33% | -3.38% | 1.33% | 1.35% | -1.23% | |
| AUD | -2.10% | -1.89% | -1.66% | -4.70% | -1.33% | 0.02% | -2.53% | |
| NZD | -2.22% | -1.91% | -1.67% | -4.71% | -1.35% | -0.02% | -2.51% | |
| CHF | 0.37% | 0.68% | 0.92% | -2.03% | 1.23% | 2.53% | 2.51% |
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 risk-averse market atmosphere made it difficult for EUR/USD to gather bullish momentum last week, even though mixed macroeconomic data releases from the US limited the US Dollar's (USD) gains.
The economic calendar will not feature any high-tier data releases on Monday. Meanwhile, US stock index futures gain between 0.25% and 0.5% in the European session, pointing to an improving risk mood.
In case risk flows dominate the financial markets in the second half of the day, the USD could stay on the back foot and allow EUR/USD to hold its ground. Nevertheless, the pair's action is likely to remain subdued in the near term.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator continues to move sideways at around 50, highlighting a lack of directional momentum.
On the downside, EUR/USD faces immediate support at 1.0840, where the Fibonacci 38.2% retracement of the latest uptrend is located. Below this level, the 100-day and the 200-day SMAs form strong support area at 1.0800-1.0790 ahead of 1.0740 (Fibonacci 78.6% retracement of the latest uptrend).
Resistances align at 1.0860 (100-period SMA),1.0880 (Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level).
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.
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.
