EUR/USD Forecast: Euro shows no signs of a recovery ahead of US data
- EUR/USD trades below 1.1100 following Tuesday's sharp decline.
- 1.1040 aligns as next support level for the pair.
- US economic calendar will feature ADP Employment Change data for September.
EUR/USD came under renewed bearish pressure on Tuesday and slumped to its lowest level since September 12 below 1.1050. The pair's stays in a consolidation phase near 1.1070 in the European morning on Wednesday but the technical outlook highlights a lack of buyer interest.
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 Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.91% | 0.67% | 1.25% | -0.21% | 0.10% | 0.79% | 0.53% | |
| EUR | -0.91% | -0.22% | 0.37% | -1.08% | -0.75% | -0.09% | -0.29% | |
| GBP | -0.67% | 0.22% | 0.73% | -0.87% | -0.53% | 0.13% | -0.08% | |
| JPY | -1.25% | -0.37% | -0.73% | -1.41% | -1.22% | -0.44% | -0.68% | |
| CAD | 0.21% | 1.08% | 0.87% | 1.41% | 0.36% | 1.00% | 0.79% | |
| AUD | -0.10% | 0.75% | 0.53% | 1.22% | -0.36% | 0.66% | 0.45% | |
| NZD | -0.79% | 0.09% | -0.13% | 0.44% | -1.00% | -0.66% | -0.23% | |
| CHF | -0.53% | 0.29% | 0.08% | 0.68% | -0.79% | -0.45% | 0.23% |
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 data published by the US Bureau of Labor Statistics showed on Tuesday that the JOLTS Job Openings rose to 8.04 million in August from 7.71 million in July. This reading came in above the market expectation of 7.65 million and helped the US Dollar (USD) hold its ground.
Furthermore, the USD benefited from the negative shift seen in risk mood and caused EUR/USD to stretch lower in the late American session on Tuesday. Reports of Iran firing about 200 ballistic missiles on Israel and Israel vowing to retaliate against the attack revived fears over a deepening conflict in the Middle East.
In the second half of the day, the ADP Employment Change data from the US will be watched closely by market participants. Investors expect the employment in the private sector to increase by 120,000 in September, following the 99,000 growth recorded in August. A positive surprise, with a reading at or above 150,000, could ease concerns over loosening conditions in the US labor market and provide a boost to the USD in the near term. On the other hand, another print below 100,000 is likely to make it difficult for the USD to gather strength.
Meanwhile, investors will keep a close eye on geopolitical headlines. In case safe-haven flows continue to dominate the action in financial markets, the USD could stay resilient even if the immediate reaction to the ADP Employment Change data hurts the currency.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays well below 40, suggesting that the bearish bias remains intact. On the downside, 1.1040 (Fibonacci 38.2% retracement of the latest uptrend) aligns as immediate support before 1.1000 (Fibonacci 50% retracement) and 1.0940 (Fibonacci 61.8% retracement).
Looking north, first resistance could be spotted at 1.1100, where the 100-period and the 200-period Simple Moving Averages (SMA) meet the Fibonacci 23.6% retracement, ahead of 1.1150 (static level, 50-period SMA) and 1.1200 (static level).
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.
(This story was corrected on October 2 at 09:13 GMT to replace the reference to JOLTS Job Openings data in the fifth paragraph with ADP Employment Change.)
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
