EUR/USD Forecast: Euro struggles to gather bullish momentum ahead of US data
- EUR/USD trades in a tight channel near 1.1200 in the European session on Thursday.
- US economic calendar will feature Retail Sales and producer inflation data.
- The near-term technical outlook suggests that buyers remain hesitant.
EUR/USD finds it difficult to gather directional momentum in the European session on Thursday and trades marginally higher on the day near 1.1200. Investors await key 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 | 0.45% | 0.22% | -0.31% | 0.63% | -0.09% | 0.57% | 0.37% | |
| EUR | -0.45% | -0.10% | -0.21% | 0.66% | 0.08% | 0.60% | 0.40% | |
| GBP | -0.22% | 0.10% | 0.08% | 0.76% | 0.19% | 0.62% | 0.49% | |
| JPY | 0.31% | 0.21% | -0.08% | 0.93% | -0.41% | 0.02% | 0.44% | |
| CAD | -0.63% | -0.66% | -0.76% | -0.93% | -0.44% | -0.06% | -0.27% | |
| AUD | 0.09% | -0.08% | -0.19% | 0.41% | 0.44% | 0.42% | 0.27% | |
| NZD | -0.57% | -0.60% | -0.62% | -0.02% | 0.06% | -0.42% | -0.23% | |
| CHF | -0.37% | -0.40% | -0.49% | -0.44% | 0.27% | -0.27% | 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).
After weakening against its major rivals on Tuesday, the US Dollar struggled to find demand in the first half of the day on Wednesday. Later in the American session, improving risk mood helped the USD stage a rebound, causing EUR/USD to erase its daily gains.
In the European session on Thursday, US stock index futures lose between 0.6% and 0.7%, pointing to a cautious market stance.
In the second half of the day, April Producer Price Index (PPI) and Retail Sales data will be featured in the US economic calendar, alongside the weekly Initial Jobless Claims.
On a monthly basis, the PPI is forecast to rise 0.3% following the 0.1% decline recorded in March. Earlier in the week, soft inflation data from the US weighed heavily on the USD. Hence, a weaker-than-expected monthly PPI print could have a similar impact on the USD.
Although investors widely expect the Federal Reserve (Fed) to leave the policy unchanged in June, the CME FedWatch Tool shows that markets are pricing in a less than 40% probability of a 25 basis points (bps) rate cut in July, suggesting that there is room for USD weakness in case investors lean toward a policy easing in July on soft producer inflation data.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays flat near 50, reflecting EUR/USD's indecisiveness.
On the upside, 1.1240 (200-period Simple Moving Average (SMA), 50-period SMA) aligns as immediate resistance before 1.1270 (Fibonacci 38.2% retracement) and 1.1300 (100-period SMA, round level). Looking south, support levels could be spotted at 1.1170 (Fibonacci 50% retracement), 1.1080 (Fibonacci 61.8% retracement) and 1.1000 (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.
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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.
