EUR/USD Forecast: Euro shows no signs of a reversal
- EUR/USD trades slightly below 1.1550 to start the new week.
- The technical picture suggests that the bearish bias remains intact in the short term.
- The US economic calendar will feature ISM Manufacturing PMI data for October.
EUR/USD registered losses for three consecutive days and closed the previous week in negative territory. The pair stays relatively quiet early Monday and trades below 1.1550.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.84% | 1.41% | 0.79% | 0.06% | -0.18% | 0.98% | 1.11% | |
| EUR | -0.84% | 0.58% | 0.02% | -0.77% | -0.94% | 0.14% | 0.27% | |
| GBP | -1.41% | -0.58% | -0.69% | -1.34% | -1.50% | -0.44% | -0.34% | |
| JPY | -0.79% | -0.02% | 0.69% | -0.80% | -1.04% | 0.08% | 0.23% | |
| CAD | -0.06% | 0.77% | 1.34% | 0.80% | -0.30% | 0.93% | 1.01% | |
| AUD | 0.18% | 0.94% | 1.50% | 1.04% | 0.30% | 1.08% | 1.16% | |
| NZD | -0.98% | -0.14% | 0.44% | -0.08% | -0.93% | -1.08% | 0.09% | |
| CHF | -1.11% | -0.27% | 0.34% | -0.23% | -1.01% | -1.16% | -0.09% |
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).
Following the Federal Reserve's (Fed) policy decisions and Chairman Jerome Powell's cautious comments on policy-easing, several Fed officials delivered hawkish remarks and helped the US Dollar (USD) preserve its strength heading into the weekend.
Kansas City Fed President Jeffrey Schmid explained that he voted to keep the policy rate unchanged at the October meeting because "the labor market is largely in balance, the economy shows continued momentum, and inflation remains too high." Dallas Fed President Lorie Logan said that she would find it difficult to cut rates again in December, unless there is clear evidence of a faster drop in inflation or a rapid cooling in the labor market. Finally, Cleveland Fed President Beth Hammack argued that they need to main monetary restriction for inflation to continue to come down.
In the second half of the day, the US economic calendar will feature the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) data for October. In case the headline PMI recovers above 50 and shows a return to expansion in the manufacturing sector's business activity, the USD could continue to outperform its rivals in the second half of the day.
If the headline PMI arrives near the market expectation of 49.2, investors could react to the changes in the Employment Index of the survey. A reading below September's 45.3 could hurt the USD in the near term, while a noticeable recovery toward 50 could have the opposite impact on the currency's performance.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator remains below 40, suggesting that the bearish bias remains intact. Unless EUR/USD manages to reclaim 1.1550 (static level, former support), technical sellers could remain interested.
On the downside, 1.1500 (Fibonacci 78.6% retracement of the latest uptrend) could be seen as the next support level ahead of 1.1450 (static level) and 1.1400 (static level, beginning point of the uptrend). Looking north, resistance levels could be spotted 1.1550 (static level), 1.1615 (20-day Simple Moving Average (SMA)) and 1.1660 (100-day SMA).
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.
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.
