EUR/USD Forecast: Euro loses bullish momentum ahead of US data
- EUR/USD retreated below 1.1150 after failing to break above 1.1200.
- The near-term technical outlook points to a loss of bullish momentum.
- Macroeconomic data releases from the US could drive the pair's action later in the day.
EUR/USD started the new week on a bullish note but lost its traction after failing to break above 1.1200. The pair trades in a narrow channel below 1.1150 early Tuesday and the near-term technical outlook points to a lack of buyer interest.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.43% | 0.27% | 1.34% | 0.13% | -0.07% | 0.40% | 0.75% | |
| EUR | -0.43% | -0.16% | 0.90% | -0.27% | -0.44% | -0.00% | 0.39% | |
| GBP | -0.27% | 0.16% | 1.19% | -0.12% | -0.28% | 0.15% | 0.55% | |
| JPY | -1.34% | -0.90% | -1.19% | -1.14% | -1.44% | -0.90% | -0.53% | |
| CAD | -0.13% | 0.27% | 0.12% | 1.14% | -0.15% | 0.27% | 0.67% | |
| AUD | 0.07% | 0.44% | 0.28% | 1.44% | 0.15% | 0.43% | 0.83% | |
| NZD | -0.40% | 0.00% | -0.15% | 0.90% | -0.27% | -0.43% | 0.38% | |
| CHF | -0.75% | -0.39% | -0.55% | 0.53% | -0.67% | -0.83% | -0.38% |
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).
In the absence of high-tier macroeconomic data releases, the cautious market stance helped the US Dollar (USD) stay resilient against its rivals. Additionally, comments from Federal Reserve (Fed) Chairman Jerome Powell further supported the currency. Powell said that the Fed is not in a hurry to cut rates quickly, adding that their monetary policy decisions will be guided by data.
Eurostat will release Harmonized Index of Consumer Price (HICP) data for September later in the session. Markets expect the HICP and the core HICP to rise 1.9% and 2.8%, respectively, on a yearly basis.
While testifying before the European Parliament on Monday, European Central Bank (ECB) President Christine Lagarde noted that the latest developments strengthened their confidence that inflation will return to their target in a timely manner. "We will take that into account in our next monetary policy meeting in October." In case the core HICP rises at a softer pace than forecast, the immediate reaction could cause the Euro to weaken against its major rivals.
In the second half of the day, the US economic docket will feature the ISM Manufacturing PMI for September and the JOLTS Job Openings data for August. A significant decline in the number of job openings, toward 7 million, could weigh on the USD in the American session. On the other hand, an unexpected increase in the ISM Manufacturing PMI, with a reading above 50, could support the USD.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart declined below 50, reflecting a loss of bullish momentum. On the downside, strong support area seems to have formed at 1.1110-1.1100 (100-period Simple Moving Average (SMA), 200-period SMA, Fibonacci 23.6% retracement of the latest uptrend) before 1.1040 (Fibonacci 38.2% retracement) and 1.1000 (Fibonacci 50% retracement).
Looking north, immediate resistance could be spotted at 1.1160 (50-period SMA, 20-period SMA) ahead of 1.1200 (static level) and 1.1275 (July 18, 2023, high).
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.
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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.
