EUR/USD Forecast: Euro sellers to retain control while 1.1000 holds as resistance
- EUR/USD moves sideways in the European session on Monday.
- The pair could struggle to stage a rebound unless risk mood improves.
- The near-term technical outlook points to oversold conditions for the pair.
EUR/USD continued to push lower on Friday and lost more than 1.5% on a weekly basis. The pair holds steady and trades in a narrow channel below 1.1000 in the European session on Monday.
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 | 1.76% | 2.14% | 4.23% | 0.61% | 1.68% | 3.11% | 1.99% | |
| EUR | -1.76% | 0.38% | 2.41% | -1.10% | -0.02% | 1.36% | 0.30% | |
| GBP | -2.14% | -0.38% | 2.14% | -1.48% | -0.41% | 0.97% | -0.08% | |
| JPY | -4.23% | -2.41% | -2.14% | -3.41% | -2.50% | -1.04% | -2.09% | |
| CAD | -0.61% | 1.10% | 1.48% | 3.41% | 1.11% | 2.48% | 1.42% | |
| AUD | -1.68% | 0.02% | 0.41% | 2.50% | -1.11% | 1.38% | 0.33% | |
| NZD | -3.11% | -1.36% | -0.97% | 1.04% | -2.48% | -1.38% | -1.07% | |
| CHF | -1.99% | -0.30% | 0.08% | 2.09% | -1.42% | -0.33% | 1.07% |
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 US Dollar (USD) gathered further strength in the American session on Friday as the upbeat employment data caused investors to lean toward a 25 basis points (bps) Federal Reserve (Fed) rate cut in November.
Nonfarm Payrolls in the US rose by 254,000 in September, beating the market forecast of 140,000 by a wide margin. Additionally, the Unemployment Rate edged lower to 4.1% in the same period, while the Labor Force Participation rate held steady at 62.7%. The USD Index extended its weekly rally following these readings and registered its largest one-week gain of the year.
The US economic calendar will not offer any high-impact macroeconomic data releases on Monday. During the American trading hours, several Fed policymakers will be delivering speeches.
According to the CME FedWatch Tool, markets currently see virtually no chance of the Fed opting for another 50 bps rate cut at the next meeting. In case Fed officials leave the door open to another large reduction in the policy rate, the USD could have a hard time preserving its strength.
In the meantime, US stock index futures are down about 0.3% in the European session. If the market mood remains sour in the second half of the day, EUR/USD's recovery attempts are likely to remain short-lived.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly below 30, suggesting that EUR/USD could make a technical correction before the next leg lower. On the upside, 1.1000 (round level, Fibonacci 50% retracement of the latest uptrend) aligns as immediate resistance before 1.1040 (Fibonacci 38.2% retracement) and 1.1100 (Fibonacci 23.6% retracement).
Looking south, first support could be spotted at 1.0950 (Fibonacci 61.8% retracement) ahead of 1.0900 (round level) and 1.0870 (Fibonacci 78.6% retracement).
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.
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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.
