EUR/USD Forecast: Euro needs to stabilize above 1.0800 to stage a rebound
- EUR/USD fluctuates in a very tight channel at around 1.0800 in the European session.
- Trading conditions remain thin on Easter Monday.
- The ISM Manufacturing PMI data will be featured in the US economic docket.
EUR/USD moves up and down in a very narrow band slightly below 1.0800 on Monday after closing the previous week marginally lower. Trading conditions remain thin and make it difficult for the pair to gather directional momentum on Easter Monday.
Euro price in the last 7 days
The table below shows the percentage change of Euro (EUR) against listed major currencies in the last 7 days. Euro was the weakest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.17% | -0.22% | -0.61% | -0.17% | 0.04% | 0.10% | 0.34% | |
| EUR | -0.17% | -0.38% | -0.77% | -0.32% | -0.14% | -0.03% | 0.17% | |
| GBP | 0.21% | 0.37% | -0.40% | 0.06% | 0.24% | 0.36% | 0.55% | |
| CAD | 0.59% | 0.76% | 0.37% | 0.44% | 0.63% | 0.75% | 0.95% | |
| AUD | 0.17% | 0.32% | -0.06% | -0.44% | 0.18% | 0.26% | 0.51% | |
| JPY | -0.03% | 0.14% | -0.15% | -0.61% | -0.20% | 0.11% | 0.32% | |
| NZD | -0.15% | 0.07% | -0.31% | -0.71% | -0.27% | -0.08% | 0.24% | |
| CHF | -0.33% | -0.17% | -0.56% | -0.95% | -0.50% | -0.30% | -0.19% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The data from the US showed on Friday that the Personal Consumption Expenditures (PCE) Price Index and the core PCE Price Index both rose 0.3% on a monthly basis in February. Later in the day, Federal Reserve Chairman Jerome Powell said that the US economy was strong without question and added that the latest core inflation numbers showed "real progress."
According to the CME FedWatch Tool, markets are pricing a nearly 70% probability that the Fed will cut the policy rate by 25 basis points.
The ISM Manufacturing PMI for March will be featured in the US economic docket later in the day. Investors expect the headline PMI to stay in the contraction territory while slightly improving to 48.4 from 47.8. The Prices Paid Index, the inflation component of the PMI survey, is forecast to come in above 50. In case the Price Paid Index unexpectedly declines below 50, the initial reaction could hurt the USD and allow EUR/USD to gain traction.
In the meantime, US stock index futures are up between 0.3% and 0.5%. A bullish opening in Wall Street could limit the USD demand during the American trading hours.
EUR/USD Technical Analysis
1.0800 (Fibonacci 61.8% retracement of the latest uptrend) aligns a pivot level for EUR/USD. In case this level stays intact as resistance, additional losses toward 1.0760 (Fibonacci 78.6% retracement) and 1.0700 (beginning point of the uptrend) could be seen.
If EUR/USD flips 1.0800 into support, the 200-period Simple Moving Average (SMA) at 1.0840 could be seen as the next recovery target before 1.0860-1.0870 (Fibonacci 38.2% retracement, 100-period SMA).
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.
