EUR/USD Forecast: Euro stabilizes but bearish bias remains intact
- EUR/USD trades in a narrow channel at around 1.1750 following Wednesday's decline.
- The US economic calendar will feature several key data releases.
- The technical picture suggests that the bearish bias remains unchanged in the short term.
Following a bullish start to the week, EUR/USD came under bearish pressure on Wednesday and fell more than 0.6%, erasing its weekly gains in the process. The pair holds steady at around 1.1750 in the European session on Thursday as investors gear up for macroeconomic data releases from the US.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | 0.05% | 0.51% | 0.84% | 0.13% | 0.80% | 0.18% | |
| EUR | -0.01% | 0.06% | 0.47% | 0.81% | 0.07% | 0.76% | 0.14% | |
| GBP | -0.05% | -0.06% | 0.36% | 0.77% | 0.03% | 0.73% | 0.13% | |
| JPY | -0.51% | -0.47% | -0.36% | 0.30% | -0.42% | 0.28% | -0.33% | |
| CAD | -0.84% | -0.81% | -0.77% | -0.30% | -0.72% | -0.03% | -0.62% | |
| AUD | -0.13% | -0.07% | -0.03% | 0.42% | 0.72% | 0.70% | 0.11% | |
| NZD | -0.80% | -0.76% | -0.73% | -0.28% | 0.03% | -0.70% | -0.63% | |
| CHF | -0.18% | -0.14% | -0.13% | 0.33% | 0.62% | -0.11% | 0.63% |
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 souring risk mood helped the US Dollar (USD) outperform its major rivals midweek. Additionally, the upbeat housing data, which showed an impressive 20.5% increase in New Home Sales in August, further supported the currency.
Meanwhile, Chicago Fed president Austan Goolsbee said on Wednesday that he would be uncomfortable with overly frontloading rate cuts, arguing that the labor market is still solid.
In the second half of the day, the US economic calendar will feature August Durable Goods Orders, weekly Initial Jobless Claims, second-quarter Gross Domestic (GDP) revision and Existing Home Sales data for August.
A noticeable decline in the number of first-time applications for unemployment benefits could be supportive for the USD with the immediate reaction. In case Durable Goods Orders data also comes in better than the market forecast for a 0.5% decline, the USD could continue to gather strength.
On the other hand, the USD could struggle to hold its ground in case US data fail to meet or surpass expectations.
In the meantime, US stock index futures lose between 0.15% and 0.2% in the European morning on Thursday. A bearish opening in Wall Street could help the USD stay resilient against its rivals, even if the initial reaction to US data hurts the currency.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 40 and EUR/USD trades slightly below the 100-period Simple Moving Average (SMA) and the 20-day SMA, which currently align at 1.1750, to reflect a bearish bias.
On the downside, 1.1700 (200-period SMA, lower limit of the ascending channel, Fibonacci 38.2% retracement of the latest uptrend) aligns as the first support level before 1.1640 (Fibonacci 50% retracement). Looking north, resistance levels could be spotted at 1.1770 (Fibonacci 23.6% retracement), 1.1820 (static level) and 1.1870-1.1880 (upper limit of the ascending channel, end-point of the uptrend).
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.
