EUR/USD Forecast: Euro sellers retain control ahead of US data
- EUR/USD trades below 1.1500 in the European session on Wednesday.
- Investors await ADP Employment Change and ISM Services PMI data from the US.
- The technical outlook highlights the bearish stance remains unchanged in the near term.
EUR/USD stages a rebound but remains slightly below 1.1500 in the European morning on Wednesday after closing the fifth consecutive day in negative territory and touching its weakest level since early August at 1.1473 on Tuesday. As market focus shifts to high-tier data releases from the US, the pair's technical outlook shows no signs of a reversal.
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 | 0.34% | 0.67% | -0.40% | 0.72% | 0.86% | 1.26% | 0.62% | |
| EUR | -0.34% | 0.34% | -0.67% | 0.39% | 0.50% | 0.92% | 0.28% | |
| GBP | -0.67% | -0.34% | -1.14% | 0.05% | 0.16% | 0.59% | -0.06% | |
| JPY | 0.40% | 0.67% | 1.14% | 1.10% | 1.24% | 1.65% | 1.15% | |
| CAD | -0.72% | -0.39% | -0.05% | -1.10% | 0.07% | 0.50% | -0.10% | |
| AUD | -0.86% | -0.50% | -0.16% | -1.24% | -0.07% | 0.42% | -0.20% | |
| NZD | -1.26% | -0.92% | -0.59% | -1.65% | -0.50% | -0.42% | -0.64% | |
| CHF | -0.62% | -0.28% | 0.06% | -1.15% | 0.10% | 0.20% | 0.64% |
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).
The risk-averse market atmosphere, as reflected by the sharp decline seen in Wall Street's main indexes, helped the US Dollar (USD) preserve its strength on Tuesday and caused EUR/USD to continue to push lower.
In the European morning on Wednesday, US stock index futures trade mixed and highlight a cautious market stance, which is likely to cap EUR/USD's recovery attempts.
In the second half of the day, ADP Employment Change and the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) data for October will be featured in the US economic calendar.
Investors expect employment in the private sector to rise by 25,000 following the 32,000 decline recorded in September. A positive surprise, with a reading of 50,000, or higher, could boost the USD with the immediate reaction and open the door for a leg lower in EUR/USD. On the flip side, investors could lean toward a Fed rate cut in December if the ADP data comes in weaker than forecast. According to the CME FedWatch Tool, markets are currently pricing in about a 70% probability of a 25 basis points (bps) rate cut in December.
Market participants will also pay close attention to the underlying details of the ISM Services PMI report. If the headline PMI comes in above 50, as expected, and there is a noticeable increase in the Employment Index of the survey, the USD is likely to gather strength. Conversely, a disappointing headline PMI print in the contraction territory below 50 and a lack of improvement in the employment component could hurt the USD and help EUR/USD hold its ground.
EUR/USD Technical Analysis
EUR/USD remains in the lower half of the descending regression channel and the Relative Strength Index (RSI) indicator sits below 40, suggesting that EUR/USD has more room on the downside before turning technically oversold.
Looking south, the first support level could be spotted at 1.1450 (lower limit of the descending channel, static level) before 1.1400 (static level) and 1.1370 (static level). On the upside, resistance levels could be seen at 1.1500 (former support), 1.1550 (static level) and 1.1580 (50-period Simple Moving Average).
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.
