EUR/USD Forecast: Euro rebounds but remains fragile
- EUR/USD trades above 1.1500 in the European session on Tuesday.
- The technical outlook doesn't yet highlight a buildup in recovery momentum.
- The pair could lose its traction in case safe-haven flows dominate markets.
EUR/USD tested 1.1500 early Tuesday but managed to stabilize above this level. Despite the latest recovery attempt, the pair's technical outlook suggests that the bearish bias remains unchanged in the near term.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.11% | -0.31% | 0.30% | 0.51% | 0.75% | 0.36% | |
| EUR | -0.03% | 0.08% | -0.28% | 0.27% | 0.46% | 0.72% | 0.33% | |
| GBP | -0.11% | -0.08% | -0.50% | 0.19% | 0.38% | 0.64% | 0.25% | |
| JPY | 0.31% | 0.28% | 0.50% | 0.58% | 0.78% | 1.03% | 0.78% | |
| CAD | -0.30% | -0.27% | -0.19% | -0.58% | 0.14% | 0.43% | 0.06% | |
| AUD | -0.51% | -0.46% | -0.38% | -0.78% | -0.14% | 0.26% | -0.13% | |
| NZD | -0.75% | -0.72% | -0.64% | -1.03% | -0.43% | -0.26% | -0.39% | |
| CHF | -0.36% | -0.33% | -0.25% | -0.78% | -0.06% | 0.13% | 0.39% |
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).
Cautious comments from Federal Reserve officials on further policy-easing helped the US Dollar (USD) hold its ground on Monday and caused EUR/USD to edge lower. Chicago Fed President Austan Goolsbee said on Monday that he would feel uneasy front-loading rate cuts, and San Francisco Fed President Mary Daly noted that she keeps an open mind about the December policy meeting.
Meanwhile, the data from the US showed on Monday that the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) declined to 48.7 in October from 49.1 in September, reflecting an ongoing contraction in the manufacturing sector's business activity. The Employment Index of the PMI survey recovered slightly, to 46 from 45.3 in this period, and the Prices Paid Index declined to 58 from 61.9. The mixed details of the PMI report may have limited the USD's gains.
The economic calendar will not offer any high-tier data releases on Tuesday. In the European session, US stock index futures trade deep in negative territory, losing between 0.65% and 1.3% on the day.
A bearish opening in Wall Street, followed by an extended decline, could help the USD find demand as a safe haven and cap EUR/USD's potential recovery attempts in the second half of the day
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart remains slightly below 40 despite the latest rebound, suggesting that EUR/USD is yet to signal a bullish reversal.
Next key support level for EUR/USD aligns at 1.1500 (Fibonacci 78.6% retracement of the latest uptrend) ahead of 1.1450 (static level) and 1.1400 (static level, beginning point of the uptrend). On the upside, resistance levels could be seen 1.1550 (static level, former support), 1.1615 (20-day Simple Moving Average (SMA)) and 1.1660 (100-day 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.
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.
