EUR/USD Forecast: Euro sellers could take action if 1.0800 support fails
- EUR/USD fluctuates above 1.0800 in the European morning.
- The pair could extend its weekly slide if 1.0800 support fails.
- The USD could lose its strength in case risk mood improves ahead of the weekend.
After rising above 1.0850 during the European trading hours on Thursday, EUR/USD reversed its direction and fell toward 1.0820, closing the fourth consecutive day in negative territory. The pair holds steady above 1.0800 early Friday but the technical selling pressure could increase if this support fails.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.43% | 0.02% | 0.91% | 0.78% | 1.34% | 0.55% | 0.61% | |
| EUR | -0.43% | -0.44% | 0.53% | 0.35% | 0.95% | 0.13% | 0.18% | |
| GBP | -0.02% | 0.44% | 0.82% | 0.79% | 1.40% | 0.55% | 0.61% | |
| JPY | -0.91% | -0.53% | -0.82% | -0.15% | 0.43% | -0.35% | -0.30% | |
| CAD | -0.78% | -0.35% | -0.79% | 0.15% | 0.52% | -0.23% | -0.17% | |
| AUD | -1.34% | -0.95% | -1.40% | -0.43% | -0.52% | -0.83% | -0.73% | |
| NZD | -0.55% | -0.13% | -0.55% | 0.35% | 0.23% | 0.83% | 0.06% | |
| CHF | -0.61% | -0.18% | -0.61% | 0.30% | 0.17% | 0.73% | -0.06% |
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).
Upbeat PMI data from Germany and the Eurozone helped the Euro find demand in the first half of the day on Thursday. Later in the American session, the data from the US showed that the business activity in the private sector expanded at its strongest pace in two years, with S&P Global Composite PMI jumping to 54.4 in May's flash estimate from 51.3 in April.
The benchmark 10-year US Treasury bond yield rose more than 1% and Wall Street's main indexes turned south after this data as investors started to price in a weaker probability of a Federal Reserve (Fed) rate cut in September. In turn, the US Dollar gathered strength against its major rivals and forced EUR/USD to erase its daily gains.
April Durable Goods Orders, which is unlikely to trigger a noticeable reaction, will be the only data featured in the US economic calendar on Friday. Hence, investors will keep a close eye on risk perception heading into the weekend.
A rebound in US stock indices following the sharp decline seen on Thursday could make it difficult for the USD to preserve its strength and open the door for a rebound in EUR/USD.
EUR/USD Technical Analysis
EUR/USD faces key support area at 1.0810-1.0800, where the 100-day Simple Moving Average (SMA) meets the Fibonacci 50% retracement of the latest downtrend. If the pair falls below that level and confirms it as resistance, 1.0750 (200-period SMA on the 4-hour chart, Fibonacci 38.2% retracement) and 1.0700 (Fibonacci 23.6% retracement) could be seen as next bearish targets.
On the upside, 1.0820 (lower limit of the ascending channel) aligns as immediate resistance. If the pair returns within the ascending channel by flipping that level into support, 1.0845 (20-period SMA) and 1.0870 (mid-point of the ascending channel) could act as next resistance levels.
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.
