EUR/USD Forecast: Euro keeps range ahead of critical Fed meeting
- EUR/USD moves sideways above 1.1700 to start the new week.
- Investors could refrain from taking large positions ahead of this week's critical Fed meeting.
- The near-term technical outlook points to a neutral stance.
EUR/USD fluctuates in a very tight range above 1.1700 in the European session on Monday after ending the previous week marginally higher. Investors could opt to stay on the sidelines ahead of this week's critical Federal Reserve (Fed) policy meeting, making it difficult for the pair to find direction 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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.21% | -0.63% | -0.56% | 0.00% | -1.64% | -1.12% | -0.30% | |
| EUR | 0.21% | -0.43% | -0.28% | 0.20% | -1.43% | -0.87% | -0.09% | |
| GBP | 0.63% | 0.43% | 0.06% | 0.63% | -1.00% | -0.45% | 0.33% | |
| JPY | 0.56% | 0.28% | -0.06% | 0.51% | -1.10% | -0.70% | 0.29% | |
| CAD | -0.01% | -0.20% | -0.63% | -0.51% | -1.54% | -1.07% | -0.31% | |
| AUD | 1.64% | 1.43% | 1.00% | 1.10% | 1.54% | 0.56% | 1.35% | |
| NZD | 1.12% | 0.87% | 0.45% | 0.70% | 1.07% | -0.56% | 0.78% | |
| CHF | 0.30% | 0.09% | -0.33% | -0.29% | 0.31% | -1.35% | -0.78% |
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).
Late Friday, credit rating agency Fitch announced that it downgraded France's sovereign credit score to A+ from AA-, explaining that it expects the upcoming budget negotiations to produce a more diluted fiscal consolidation package than that proposed by the outgoing administration. This development seems to be not allowing the Euro to gather strength early Monday.
Meanwhile, European Central Bank (ECB) Governing Council member Martin Kocher said if the current appreciation trend of the Euro continues, it could become problematic for export-oriented industries.
The economic calendar will not feature any high-impact macroeconomic data releases on Monday. In the early European session, US stock index futures trade mixed. In case markets turn risk-averse in the American session, EUR/USD could struggle to hold its ground. Nevertheless, the pair's volatility could remain limited, while investors prepare for the Fed event that poses a two-way risk for the pair.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays above 50 and EUR/USD holds steady above the 20-day and the 50-day Simple Moving Averages (SMAs). Although this technical stance highlights a lack of seller interest, it doesn't offer any signs of a buildup in bullish momentum either.
On the upside, 1.1770 (static level) aligns as the first resistance level before 1.1800 (round level, upper limit of the ascending channel) and 1.1830 (July 1 high). Looking south, support levels could be spotted at 1.1690-1.1700 (20-day SMA, 50-period SMA, 100-period SMA) and 1.1660 (50-day SMA, 200-period SMA, lower limit of the ascending channel).
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.
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.
