EUR/USD Forecast: Euro shows no signs of a reversal
- EUR/USD trades above 1.1700 to start the new week.
- The technical outlook suggests that the uptrend is likely to continue.
- Month-end flows could ramp up market volatility later in the day.
EUR/USD holds steady and fluctuates above 1.1700 in the European morning on Monday after gaining more than 1.5% in the previous week. Although the technical outlook suggests that the pair is likely to extend its uptrend, position adjustments on the last day of the first half of the year could ramp up market volatility and trigger irregular movements.
Euro PRICE This month
The table below shows the percentage change of Euro (EUR) against listed major currencies this month. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -3.00% | -1.50% | 0.03% | -0.96% | -1.41% | -1.72% | -2.95% | |
| EUR | 3.00% | 1.57% | 3.11% | 2.10% | 1.68% | 1.65% | 0.05% | |
| GBP | 1.50% | -1.57% | 1.52% | 0.54% | 0.12% | -0.08% | -1.48% | |
| JPY | -0.03% | -3.11% | -1.52% | -0.98% | -1.33% | -1.59% | -2.91% | |
| CAD | 0.96% | -2.10% | -0.54% | 0.98% | -0.37% | -0.64% | -2.01% | |
| AUD | 1.41% | -1.68% | -0.12% | 1.33% | 0.37% | -0.03% | -1.56% | |
| NZD | 1.72% | -1.65% | 0.08% | 1.59% | 0.64% | 0.03% | -1.57% | |
| CHF | 2.95% | -0.05% | 1.48% | 2.91% | 2.01% | 1.56% | 1.57% |
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 broad-based selling pressure surrounding the US Dollar (USD) fuelled EUR/USD's rally last week. Early Monday, the USD struggles to find demand and helps the pair hold its ground as the market mood remains upbeat, with US stock index futures rising about 0.5% on the day.
Earlier in the day, the data from Germany showed that Retail Sales declined by 1.6% on a monthly basis in May, following the 0.6% contraction recorded in April. This reading came in worse than the market expectation for an increase of 0.5% but failed to trigger a noticeable market reaction. In the second half of the day, Germany's Destatis will release preliminary Consumer Price Index (CPI) data for June.
Meanwhile, French Finance Minister Eric Lombard told newspaper La Tribune Dimanche on Sunday that he thinks that they are going to reach a trade deal with the US. "Regarding the deadline, my wish is for another postponement. I would rather have a good deal than a bad deal on July 9," he added. In case markets remain optimistic about an EU-US trade deal, EUR/USD's downside is likely to remain limited.
EUR/USD Technical Analysis
EUR/USD remains within the upper half of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart holds above 60. On the upside, 1.1730 (static level) aligns as an interim resistance level before 1.1760 (upper limit of the ascending channel) and 1.1800 (static level, round level).
Looking south, 1.1700 (static level, 20-period Simple Moving Average) could be seen as the first support level ahead of 1.1660 (mid-point of the ascending channel) and 1.1620 (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.
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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.
