EUR/USD Forecast: Euro retreats as markets reassess ECB rate hike odds
- EUR/USD declined below 1.0900 after EU inflation data on Thursday.
- Markets price in a less than 40% probability of an ECB rate hike in September.
- Euro could continue to stretch lower unless it reclaims 1.0900.
EUR/USD came under renewed bearish pressure and dropped below 1.0900 after touching a two-week high of 1.0947 on Wednesday. The pair's near-term technical outlook highlights a loss of bullish momentum and sellers could look to retain control of the action unless the Euro reclaims 1.0900.
Inflation in the Eurozone, as measured by the change in the Harmonized Index of Consumer Price (HICP), held steady at 5.3% on a yearly basis in August. The Core HICP rose 5.3% in the same period following the 5.5% increase recorded in July and matched the market expectation.
According to Reuters, the probability of the European Central bank (ECB) raising key rates by 25 basis points (bps) in September declined below 40% after this data. On Wednesday, markets were pricing in a nearly 60% odd of another ECB hike after some of the regional inflation readings from Germany came in higher than forecast.
Euro price today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.52% | 0.26% | 0.09% | 0.16% | -0.16% | 0.10% | 0.46% | |
| EUR | -0.49% | -0.27% | -0.41% | -0.35% | -0.67% | -0.41% | -0.05% | |
| GBP | -0.27% | 0.25% | -0.17% | -0.09% | -0.43% | -0.16% | 0.21% | |
| CAD | -0.10% | 0.41% | 0.14% | 0.07% | -0.26% | 0.00% | 0.36% | |
| AUD | -0.16% | 0.35% | 0.08% | -0.06% | -0.31% | -0.05% | 0.29% | |
| JPY | 0.17% | 0.68% | 0.41% | 0.24% | 0.34% | 0.28% | 0.62% | |
| NZD | -0.07% | 0.42% | 0.14% | 0.00% | 0.07% | -0.26% | 0.37% | |
| CHF | -0.47% | 0.05% | -0.20% | -0.38% | -0.30% | -0.63% | -0.36% |
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).
Later in the day, weekly Initial Jobless Claims data from the US could influence the US Dollar's (USD) valuation. Earlier in the week, disappointing job openings and private sector employment data caused the USD to weaken against its major rivals. Markets expect the number of first-time applications for unemployment benefits to rise to 235,000 from 230,000. A reading close to 250,000 could reaffirm loosening conditions in the labor market and weigh on the USD.
The US economic docket will also feature the Personal Consumption Expenditures (PCE) Price Index data for July. On a monthly basis, the Core PCE Price Index is forecast to rise 0.2%. Unless there is a significant surprise, investors are likely to pay more attention to the Jobless Claims data.
EUR/USD Technical Analysis
EUR/USD dropped below 1.0900, where the 100-period Simple Moving Average (SMA) on the 4-hour chart and the Fibonacci 23.6% retracement of the latest downtrend align. If the pair fails to reclaim that level, additional losses toward 1.0850 (50-period SMA), 1.0800 (psychological level) and 1.0770 (end-point of the downtrend) could be seen.
In case EUR/USD manages to stabilize above 1.0900, resistances are located at 1.0930 (static level) and 1.0960-1.0970 (Fibonacci 38.2% retracement, 200-period SMA).
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.
