EUR/USD Forecast: Sellers dominate action as USD rallies on Tump's projected victory
- EUR/USD dropped to a fresh multi-month low early Wednesday.
- The US Dollar rallied on news of Donald Trump retaking battleground states.
- The technical outlook suggests that the bearish bias remains intact.
EUR/USD came under heavy bearish pressure during the Asian trading hours on Wednesday and touched its lowest level since late June near 1.0700. Although the pair recovered a portion of its daily losses, it's still down more than 1% on the day, trading below 1.0800.
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 Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.66% | 0.08% | 1.20% | -0.18% | -0.35% | 0.36% | 0.77% | |
| EUR | -0.66% | -0.61% | 0.10% | -1.22% | -0.68% | -0.69% | -0.28% | |
| GBP | -0.08% | 0.61% | 0.46% | -0.62% | -0.07% | -0.08% | 0.32% | |
| JPY | -1.20% | -0.10% | -0.46% | -1.36% | -0.98% | -0.62% | -0.13% | |
| CAD | 0.18% | 1.22% | 0.62% | 1.36% | 0.04% | 0.53% | 0.95% | |
| AUD | 0.35% | 0.68% | 0.07% | 0.98% | -0.04% | -0.00% | 0.39% | |
| NZD | -0.36% | 0.69% | 0.08% | 0.62% | -0.53% | 0.00% | 0.40% | |
| CHF | -0.77% | 0.28% | -0.32% | 0.13% | -0.95% | -0.39% | -0.40% |
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 Donald Trump retaking battleground states Georgia and North Carolina triggered a US Dollar (USD) rally early Wednesday. After capturing Pennsylvania as well, Trump's victory is all but officially confirmed. According to the Associated Press, Donald Trump currently has secured 267 of the 270 electoral votes needed to win the White House. In Michigan and Wisconsin, two other key states yet to be called, Trump remains in the lead.
The benchmark 10-year US Treasury bond yield is up nearly 3% on the day at around 4.4%, further supporting the USD. Meanwhile, US stock index futures were last seen rising between 1.8% and 2.4%. In case risk flows dominate the action in the second half of the day, the USD rally could lose steam, opening the door for a rebound in EUR/USD.
On Thursday, the Federal Reserve will announce monetary policy decisions and it's widely expected to cut the interest rate by 25 basis points.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart remains below 40 after recovering from 30, suggesting that the bearish outlook remains unchanged following a technical correction.
On the downside, 1.0700 (static level) aligns as first support before 1.0670 (static level) and 1.0600 (static level). In case EUR/USD manages to clear 1.0800 (static level) and start using this level as support, the 200-day Simple Moving Average (SMA) could be seen as the next significant resistance at 1.0870.
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.
