EUR/USD Forecast: Euro turns bearish to start new week
- EUR/USD trades in negative territory below 1.1100 on Monday.
- The technical outlook points to a buildup of bearish momentum.
- The US Dollar preserves its strength despite disappointing jobs data.
After rising above 1.1150 for the first time in a week in the early American session on Friday, EUR/USD reversed its direction and closed the day below 1.1100. The pair struggles to find a foothold early Monday and declines toward 1.1050.
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 weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | 0.17% | -2.08% | 0.56% | 1.45% | 1.49% | -0.36% | |
| EUR | 0.10% | 0.30% | -1.98% | 0.65% | 1.56% | 1.58% | -0.27% | |
| GBP | -0.17% | -0.30% | -2.27% | 0.33% | 1.24% | 1.30% | -0.59% | |
| JPY | 2.08% | 1.98% | 2.27% | 2.63% | 3.62% | 3.76% | 1.67% | |
| CAD | -0.56% | -0.65% | -0.33% | -2.63% | 0.92% | 0.92% | -0.92% | |
| AUD | -1.45% | -1.56% | -1.24% | -3.62% | -0.92% | 0.00% | -1.80% | |
| NZD | -1.49% | -1.58% | -1.30% | -3.76% | -0.92% | -0.01% | -1.82% | |
| CHF | 0.36% | 0.27% | 0.59% | -1.67% | 0.92% | 1.80% | 1.82% |
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 data published by the US Bureau of Statistics showed on Friday that Nonfarm Payrolls rose 142,000 in August, up from the 89,000 (revised from 114,000) increase recorded in July. This reading missed the market expectation of 160,000. Furthermore, the Unemployment Rate edged lower to 4.2% as forecast, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, rose to 3.8% from 3.6%.
The US Dollar (USD) came under selling pressure with the immediate reaction to labor market data and allowed EUR/USD to push higher. However, the negative shift seen in risk sentiment, as reflected by sharp declines seen in major equity indexes in the US, helped the USD gather strength heading into the weekend, causing EUR/USD to turn south.
The US economic docket will not feature any high-impact macroeconomic data releases on Monday. Hence, investors could react to changes in risk perception.
At the time of press, US stock index futures were up between 0.45% and 0.75% on the day. A bullish opening in Wall Street, followed by a decisive rebound, could limit the USD's gains and help EUR/USD gain traction.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart dropped below 40 and EUR/USD's last five 4-hour candles closed below the 100-period Simple Moving Average (SMA), highlighting a buildup of bearish momentum.
On the downside, 1.1040 (Fibonacci 38.2% retracement of the latest uptrend) aligns as immediate support before 1.1000-1.0990 (Fibonacci 50% retracement, psychological level, 200-period SMA) and 1.0940 (Fibonacci 61.8% retracement).
EUR/USD could face first resistance at 1.1100 (Fibonaccci 23.6% retracement, 100-period SMA) ahead of 1.1160 (static level) and 1.1200 (end-point of the uptrend).
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.
