EUR/USD Forecast: Euro remains fragile ahead of ECB meeting
- EUR/USD trades below 1.0900 for the first time since early August.
- The US economic calendar will not feature high-tier data releases on Tuesday.
- 1.0870 aligns as the next support level for the pair.
Following a quiet start to the week, EUR/USD came under modest bearish pressure in the American session on Monday and closed the day in negative territory. The pair struggles to stage a rebound early Tuesday and trades at its lowest level since early August, slightly below 1.0900.
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 weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.63% | 0.05% | 0.58% | 1.38% | 0.69% | 0.70% | 0.85% | |
| EUR | -0.63% | -0.56% | -0.03% | 0.75% | 0.07% | 0.06% | 0.21% | |
| GBP | -0.05% | 0.56% | 0.55% | 1.30% | 0.64% | 0.62% | 0.78% | |
| JPY | -0.58% | 0.03% | -0.55% | 0.90% | 0.11% | 0.09% | 0.26% | |
| CAD | -1.38% | -0.75% | -1.30% | -0.90% | -0.67% | -0.66% | -0.53% | |
| AUD | -0.69% | -0.07% | -0.64% | -0.11% | 0.67% | -0.02% | 0.15% | |
| NZD | -0.70% | -0.06% | -0.62% | -0.09% | 0.66% | 0.02% | 0.16% | |
| CHF | -0.85% | -0.21% | -0.78% | -0.26% | 0.53% | -0.15% | -0.16% |
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-impact macroeconomic data releases, the cautious market mood helped the US Dollar (USD) stay resilient against its major rivals on Monday, causing EUR/USD to edge lower.
Early Tuesday, US stock index futures trade marginally lower on the day, suggesting that the market mood is yet to improve.
In the European session, Eurostat will publish Industrial Production data for August and Germany's ZEW economic research institute will release October sentiment data for the Eurozone and Germany. The ZEW Survey - Economic Sentiment Index is forecast to rise both for the Eurozone and Germany. If these data surprise to the upside, the immediate reaction could help the Euro find support. Nevertheless, investors are unlikely to take large positions ahead of the European Central Bank's (ECB) policy announcements due Thursday.
In the second half of the day, the Federal Reserve Bank of New York's Empire State Manufacturing Index for October will be the only data release from the US, which is unlikely to trigger a noticeable market reaction.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart edged slightly higher after dropping to 30, suggesting that EUR/USD's near-term technical outlook remains bearish, with the possibility of a technical correction.
On the downside, 1.0870 (Fibonacci 78.6% retracement of the latest uptrend) aligns as first support before 1.0800 (round level) and 1.0780 (static level, beginning point of the uptrend). In case EUR/USD rises above 1.0900 (static level) and starts using this level as support, 1.0950 (Fibonacci 61.8% retracement) and 1.1000 (Fibonacci 50% retracement) could be seen as next resistance levels.
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.
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.
