EUR/USD Forecast: Euro looks to renew 2024-high
- EUR/USD holds above 1.1150 after closing in positive territory on Thursday.
- The near-term technical outlook suggests that the bullish potential remains intact.
- In the absence of high-tier data releases, investors could react to changes in risk perception.
EUR/USD gathered bullish momentum and gained 0.4% on Thursday. The pair holds its ground and trades modestly higher on the day above 1.1150 in the European morning on Friday.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.88% | -1.48% | 1.15% | -0.28% | -1.76% | -1.51% | -0.21% | |
| EUR | 0.88% | -0.66% | 2.12% | 0.57% | -0.95% | -0.68% | 0.63% | |
| GBP | 1.48% | 0.66% | 2.72% | 1.22% | -0.30% | -0.01% | 1.31% | |
| JPY | -1.15% | -2.12% | -2.72% | -1.47% | -2.88% | -2.66% | -1.47% | |
| CAD | 0.28% | -0.57% | -1.22% | 1.47% | -1.56% | -1.22% | -0.03% | |
| AUD | 1.76% | 0.95% | 0.30% | 2.88% | 1.56% | 0.28% | 1.59% | |
| NZD | 1.51% | 0.68% | 0.01% | 2.66% | 1.22% | -0.28% | 1.31% | |
| CHF | 0.21% | -0.63% | -1.31% | 1.47% | 0.03% | -1.59% | -1.31% |
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) staged a short-lasting rebound in the early American session on Thursday after the data published by the US Department of Labor showed that the weekly Initial Jobless Claims declined to 219,000 from 231,000. With risk flows dominating the action in the financial markets, however, the USD came under renewed bearish pressure later in the session, allowing EUR/USD to stretch higher.
The US economic calendar will not feature any high-tier data releases on Friday. Later in the day, Federal Reserve Bank of Philadelphia President Patrick Harker, a non-voting member of the FOMC, will be delivering a speech. Additionally, European Central Bank (ECB) President Christine Lagarde will speak at the 2024 Michel Camdessus Central Banking Lecture.
Several ECB policymakers voiced their willingness to wait until December to have more data to assess before lowering the policy rate again. Although it's very unlikely, the Euro could weaken against its rivals in case Lagarde leaves the door open for a rate reduction in October.
Meanwhile, US stock index futures trade marginally lower on the day after Wall Street's main indexes registered impressive gains on Thursday. A continuation of the risk rally in the second half of the day could further weigh on the USD and help EUR/USD push higher heading into the weekend.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 70, suggesting that EUR/USD's bullish bias remains unchanged, with a possibility of a technical correction in the near term.
First resistance could be spotted at 1.1200 (static level, end-point of the uptrend, 2024-high) before 1.1275 (July 18, 2023, high) and 1.1300 (round level). On the downside, 1.1135 (20-period Simple Moving Average) aligns as interim support ahead of 1.1100 (Fibonacci 23.6% retracement) and 1.1080 (100-period Simple Moving Average).
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.
