EUR/USD Forecast: Euro struggles to turn bullish despite opening higher
- EUR/USD opened higher after closing the previous week deep in the red.
- The technical outlook is yet to point to a buildup of bullish momentum.
- Improving risk mood could help the pair stretch higher.
EUR/USD lost more than 1% for the third consecutive week but opened with a bullish gap on Monday. The pair, however, retreats slightly after testing 1.0500 and the technical outlook shows a lack of bullish momentum.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.30% | -0.36% | 0.29% | 0.08% | -0.05% | 0.17% | -0.05% | |
| EUR | 0.30% | -0.23% | -0.02% | -0.21% | 0.17% | -0.12% | -0.33% | |
| GBP | 0.36% | 0.23% | 0.21% | 0.02% | 0.42% | 0.12% | -0.10% | |
| JPY | -0.29% | 0.02% | -0.21% | -0.20% | 0.09% | -0.05% | -0.15% | |
| CAD | -0.08% | 0.21% | -0.02% | 0.20% | 0.02% | 0.10% | -0.16% | |
| AUD | 0.05% | -0.17% | -0.42% | -0.09% | -0.02% | -0.28% | -0.50% | |
| NZD | -0.17% | 0.12% | -0.12% | 0.05% | -0.10% | 0.28% | -0.22% | |
| CHF | 0.05% | 0.33% | 0.10% | 0.15% | 0.16% | 0.50% | 0.22% |
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).
News of president-elect Donald Trump nominating fund manager Scott Bessent as the US Treasury Secretary caused US Treasury bond yields to decline sharply at the weekly opening, making it difficult for the USD to find demand.
Assessing Bessent's nomination, "Bessent, a hedge fund CEO, is known to be a fiscal hawk, so this should ease some of the more extreme deficit fears as he has advocated a 3% deficit by 2028," said Deutsche Bank analysts. "In practise that will be extremely tough but for now the market can be a bit relieved. He is also thought to be less extreme on trade policy than some of his rivals for the job."
In the meantime, US stock index futures are up about 0.5% in the European morning on Monday, highlighting a positive shift in risk mood. In case risk flows continue to dominate the action in financial markets after Wall Street's opening bell, the USD could come under renewed selling pressure and help EUR/USD extend its recovery.
The European economic docket will feature IFO - Current Assessment and IFO - Business Climate figures for November. A significant decline in these business sentiment data could limit the Euro's gains with the immediate reaction.
EUR/USD Technical Analysis
EUR/USD remains within a descending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 despite the bullish opening to the week. On the downside, 1.0450 (mid-point of the descending channel) aligns as immediate support before 1.0400 (round level) and 1.0360 (lower limit of the descending channel).
Looking north, first resistance could be spotted at 1.0500 (round level, static level) ahead of 1.0535 (50-period Simple Moving Average (SMA), upper limit of the ascending channel) and 1.0600 (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.
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.
