EUR/USD Forecast: Euro trades near key support level
- EUR/USD stays relatively calm below 1.1700 early Thursday.
- The pair could face renewed bearish pressure in case 1.1680 support fails.
- The cautious market stance could make it difficult for the Euro to stage a rebound.
EUR/USD closed in negative territory on Wednesday as the US Dollar (USD) managed to stay resilient against its rivals in the second half of the day. The pair moves sideways below 1.1700 in the European morning on Thursday but the technical outlook doesn't yet point to a recovery attempt.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.45% | 0.20% | -0.17% | 1.00% | -0.32% | 0.17% | 0.72% | |
| EUR | -0.45% | -0.26% | -0.57% | 0.55% | -0.77% | -0.29% | 0.26% | |
| GBP | -0.20% | 0.26% | -0.42% | 0.81% | -0.51% | -0.03% | 0.52% | |
| JPY | 0.17% | 0.57% | 0.42% | 1.15% | -0.18% | 0.31% | 0.91% | |
| CAD | -1.00% | -0.55% | -0.81% | -1.15% | -1.16% | -0.83% | -0.29% | |
| AUD | 0.32% | 0.77% | 0.51% | 0.18% | 1.16% | 0.49% | 1.04% | |
| NZD | -0.17% | 0.29% | 0.03% | -0.31% | 0.83% | -0.49% | 0.55% | |
| CHF | -0.72% | -0.26% | -0.52% | -0.91% | 0.29% | -1.04% | -0.55% |
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 USD benefited from the upbeat data and the cautious market stance midweek, causing EUR/USD so stretch lower.
The Institute for Supply Management (ISM) reported that the Services Purchasing Managers' Index (PMI) rose to 54.4 in December from 52.6 in November, showing an ongoing expansion in the sector's business activity at an accelerating pace. Moreover, the Employment Index of the PMI survey climbed to 52 after staying in contraciton territory, below 50, for six consecutive months.
Later in the day, the US Bureau of Labor Statistics (BLS) will publish the weekly Initial Jobless Claims data. A reading at or below 200,000 could be supportive for the USD and cause EUR/USD to continue to push lower. Conversely, a disappointing print above 220,000 could have the opposite impact on the pair's action. However, investors could opt to wait for tomorrow's Nonfarm Payrolls data before taking large positions.
Nevertheless, EUR/USD could have a hard time holding its ground if markets remain risk-averse. As of writing, US stock index futures were down between 0.2% and 0.3%.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1681. The 20-period Simple Moving Average (SMA) extends lower beneath the 50- and 100-period SMAs, underscoring bearish pressure. The 50-period SMA declines while the 100-period SMA flattens, and price holds below both. EUR/USD sits just above the 200-period SMA at 1.1680, which offers nearby dynamic support. The Relative Strength Index (RSI) prints at 40, below the midline, suggesting subdued momentum and keeping rebounds limited.
Measured from the 1.1503 low to the 1.1800 high, the 50% retracement at 1.1650 and 61.8% retracement at 1.1615 offer next support levels in case 1.1680 fails. Looking north, the first resistance level could be seen at 1.1690-1.1700 (38.2% retracement, round level) ahead of 1.1730-1.1740 (23.6% retracement, 50-period SMA, 100-period SMA).
(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.
