EUR/USD Forecast: Euro shows signs of life ahead of inflation data
- EUR/USD rises toward 1.0600 in the European morning on Friday.
- Eurostat will publish preliminary November inflation data for the Eurozone.
- The technical outlook points to a buildup of bullish momentum.
EUR/USD gains traction in the European morning on Friday and advances toward 1.0600. The pair's technical outlook highlights a buildup of bullish momentum as investors await November inflation data from the Eurozone.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.59% | -1.62% | -2.84% | 0.26% | -0.34% | -1.18% | -1.33% | |
| EUR | 1.59% | -0.20% | -1.90% | 1.28% | 1.20% | -0.16% | -0.32% | |
| GBP | 1.62% | 0.20% | -1.70% | 1.49% | 1.40% | 0.04% | -0.12% | |
| JPY | 2.84% | 1.90% | 1.70% | 3.22% | 3.04% | 1.79% | 1.77% | |
| CAD | -0.26% | -1.28% | -1.49% | -3.22% | -0.45% | -1.42% | -1.61% | |
| AUD | 0.34% | -1.20% | -1.40% | -3.04% | 0.45% | -1.34% | -1.49% | |
| NZD | 1.18% | 0.16% | -0.04% | -1.79% | 1.42% | 1.34% | -0.15% | |
| CHF | 1.33% | 0.32% | 0.12% | -1.77% | 1.61% | 1.49% | 0.15% |
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 action in financial markets remained subdued on Thursday, making it difficult for EUR/USD to stage a decisive move in either direction, as trading conditions thinned out with financial markets in the US remaining closed in observance of the Thanksgiving Day holiday.
Early Friday, US stock index futures push higher and the benchmark 10-year US Treasury bond yields declines toward 4.2%, weighing on the US Dollar (USD) and helping EUR/USD stretch higher.
Eurostat will release preliminary Harmonized Index of Consumer Prices (HICP) data for November later in the session. On a yearly basis, the HICP is forecast to rise 2.3% following the 2% increase recorded in October. A stronger-than-forecast increase in this data could support the Euro with the immediate reaction.
Bond and stock markets in the US will close early on Friday and the US economic calendar will not feature any high-impact macroeconomic data releases. Hence, EUR/USD could face heightened volatility amid month-end flows toward the end of the European session.
EUR/USD Technical Analysis
EUR/USD climbed above the 100-period Simple Moving Average (SMA), currently located at 1.0575. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart rose above 60, suggesting that the pair has more room on the upside before turning technically overbought.
On the upside, 1.0610 (static level) aligns as next resistance before 1.0660 (static level) and 1.0700 (200-period SMA). Looking south, first support could be spotted at 1.0575 (100-period SMA) ahead of 1.0520 (50-period SMA) and 1.0500 (round level, 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.
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.
