EUR/USD Forecast: Euro struggles to preserve bullish momentum
- EUR/USD trades in a tight channel below 1.1600 on Monday.
- The pair clings to a bullish stance but momentum remains weak.
- The ISM Manufacturing PMI will be featured in the US economic calendar.
EUR/USD seems to have entered a consolidation slightly below 1.1600 after rising more than 0.7% in the previous week. While the technical picture suggests that the bullish bias remain intact, the risk-averse market atmosphere could make it difficult for the pair to continue to push higher in the near term.
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 strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.67% | -0.83% | -0.59% | -0.80% | -1.27% | -1.99% | -0.48% | |
| EUR | 0.67% | -0.16% | 0.07% | -0.13% | -0.62% | -1.33% | 0.19% | |
| GBP | 0.83% | 0.16% | 0.25% | 0.03% | -0.45% | -1.17% | 0.35% | |
| JPY | 0.59% | -0.07% | -0.25% | -0.21% | -0.74% | -1.54% | 0.11% | |
| CAD | 0.80% | 0.13% | -0.03% | 0.21% | -0.48% | -1.20% | 0.32% | |
| AUD | 1.27% | 0.62% | 0.45% | 0.74% | 0.48% | -0.71% | 0.83% | |
| NZD | 1.99% | 1.33% | 1.17% | 1.54% | 1.20% | 0.71% | 1.54% | |
| CHF | 0.48% | -0.19% | -0.35% | -0.11% | -0.32% | -0.83% | -1.54% |
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 US Dollar (USD) weakened against its rivals last week as dovish comments from Federal Reserve (Fed) officials revived expectations of a 25 basis points (bps) rate cut at the December meeting. According to the CME FedWatch Tool, markets are pricing in about a 90% chance of a rate cut next week.
Nevertheless, the negative shift seen in risk mood helps the USD hold its ground early Monday and limits EUR/USD's upside. At the time of press, US stock index futures were down between 0.6% and 0.9%. A bearish opening in Wall Street could help the USD find demand as a safe haven and cause EUR/USD to correct lower 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) report for November.
Markets expect the headline PMI to edge slightly lower to 48.6 in November from 48.7 in October. In case this data comes in above 50 and highlights an expansion in the manufacturing sector's business activity, the USD could gather strength with the immediate market reaction. Conversely, a disappointing print, especially if combined with a decline in the Employment Index of the PMI survey, could trigger another USD selloff and allow EUR/USD to turn north.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) climbs above the 100- and 200-period SMAs, with price holding above all key averages. The RSI (14) prints 54, neutral, reflecting a loss of bullish momentum in the near term.
Measured from the 1.1885 high to the 1.1472 low, the 38.2% retracement at 1.1630 acts as the next resistance level before 1.1680 (Fibonacci 50% retracement). On the downside, immediate support is seen at 1.1590 (200-period SMA) ahead of 1.1570 (Fibonacci 23.6% retracement, 100-period SMA) and 1.1500 (static level, round level).
(The technical analysis of this story was written with the help of an AI tool)
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.
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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.
