EUR/USD Forecast: Euro maintains bullish bias to start new week
- EUR/USD trades above 1.1100 in the European session on Monday.
- The technical outlook suggests that the bullish bias remains intact.
- The Federal Reserve (Fed) will announce monetary policy decisions on Wednesday.
EUR/USD holds its ground in the European session on Monday and trades above 1.1100, supported by the broad-based US Dollar (USD) weakness. The technical outlook highlights a buildup of bullish momentum.
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 Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.26% | -0.29% | -1.75% | 0.11% | -0.85% | -0.10% | 0.05% | |
| EUR | 0.26% | -0.09% | -1.41% | 0.37% | -0.64% | 0.17% | 0.29% | |
| GBP | 0.29% | 0.09% | -1.46% | 0.46% | -0.55% | 0.24% | 0.37% | |
| JPY | 1.75% | 1.41% | 1.46% | 1.87% | 0.91% | 1.63% | 2.01% | |
| CAD | -0.11% | -0.37% | -0.46% | -1.87% | -0.92% | -0.23% | 0.10% | |
| AUD | 0.85% | 0.64% | 0.55% | -0.91% | 0.92% | 0.79% | 0.90% | |
| NZD | 0.10% | -0.17% | -0.24% | -1.63% | 0.23% | -0.79% | 0.15% | |
| CHF | -0.05% | -0.29% | -0.37% | -2.01% | -0.10% | -0.90% | -0.15% |
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) came under selling pressure in the second half of the previous week as investors reassessed the probability of a 50 basis points (bps) Federal Reserve (Fed) rate cut at the upcoming policy meeting.
Softer-than-expected producer inflation data and an article by The Wall Street Journal reporter Nick Timiraos, who is widely seen as a “Fed insider,” claiming that the size of the Fed’s rate cut at next week’s meeting will be a close call, revived expectations for an aggressive policy easing. According go the CME FedWatch Tool, markets are currently pricing in a nearly 60% chance of a large rate reduction this Wednesday.
The economic calendar will not offer any high-tier data releases on Monday. Hence, investors could refrain from taking large positions.
On Tuesday, ZEW business sentiment survey for the Eurozone and Germany will be featured in the European economic docket. Later in the day, the US Census Bureau will release Retail Sales data for August.
EUR/USD Technical Analysis
EUR/USD broke above the descending trend line coming from late August and the pair closed the last 4-hour candle above the 100-period Simple Moving Average (SMA). Additionally, the Relative Strength Index (RSI) indicator holds comfortably above 60, reflecting the bullish bias.
On the upside, 1.1160 (static level) aligns as first resistance before 1.1200 (static level) and 1.1275 (July 18, 2023, high).
In case EUR/USD drops below 1.1100 (Fibonacci 23.6% retracement of the latest uptrend, 100-period SMA) and starts using this level as resistance, technical sellers could take action. In this scenario, 1.1040-1.1030 (Fibonacci 38.2% retracement, 200-period SMA) could be seen as next support.
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.
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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.
