- EUR/USD tumbled back below 1.0400 amid tepid market flows.
- New Year’s midweek holidays set to constrain volumes even further.
- A thin data schedule this week leaves Fiber hopes on ice.
EUR/USD legged it lower on Monday, falling back below the 1.0400 handle as markets continue to churn through the year-end holiday season. Broad-market volumes are crunched and investors are finding little reason to push assets too far in either direction, but a fresh bout of cooling risk appetite has taken most asset baskets back into the low side of near-term congestion.
German equity markets will be shuttered on Tuesday and Wednesday for the New Year’s Eve and New Year’s Day holidays, respectively. German final HCOB Manufacturing Purchasing Managers Index (PMI) figures are due on Thursday, but the non-preliminary numbers are unlikely to spark much momentum in the Euro. German labor figures, including monthly Unemployment Change for December which is slated to tick up to 15K from 7K, are slated for Friday.
The key data print this week will be the December US ISM PMI figures, which are also expected on Friday. December’s US ISM Manufacturing PMI is expected to tick down to 48.3 from 48.4. Several Federal Reserve (Fed) policymakers are also slated to make appearances throughout the back half of the week as Fed speakers attempt to smooth over the Fed’s recent pivot into lower-than-expected forecasts for the number of rate cuts anticipated in 2024.
EUR/USD price forecast
With EUR/USD battling back into the low side of 1.0400, the immediate key figure becomes the recent price floor near 1.0350. Price action has steadily drifted into the low end after the Fiber kicked off a backslide from September’s highs just north of 1.1200.
Despite avoiding making any fresh lows below the mid-November bottom of 1.0332, EUR/USD is still on pace to close in the red for a fifth consecutive week, and traders watching the longer timeframes will note the Fiber has closed down for all but two of the last 13 consecutive weeks.
EUR/USD daily chart
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD consolidates gains below 1.1400 on weaker US Dollar
EUR/USD consolidates its recovery gains below 1.1400 in early Europe on Monday. Upbeat risk sentiment on Trump's tairff concession news fails to lift the US Dollar, supporting the pair. US-China trade headlines will continue to dominate ahead of Fedspeak.
GBP/USD climbs above 1.3150 as USD sellers refuse to give up
GBP/USD preserves its bullish momentum and trades above 1.3150 in the European session on Monday. The sustained US Dollar weakness suggests that the path of least resistance for the pair remains to the upside. US-China trade updates remain in focus.
Gold retreats from record-high, holds above $3,200
Gold stays under bearish pressure on Monday and declines toward $3,200 after setting a new record-high of $3,245 at the weekly opening. Easing concerns over a deepening trade conflict between the US and China seem to be causing XAU/USD to enter a correction phase.
Six Fundamentals for the Week: Tariffs, US Retail Sales and ECB stand out Premium
"Nobody is off the hook" – these words by US President Donald Trump keep markets focused on tariff policy. However, some hard data and the European Central Bank (ECB) decision will also keep things busy ahead of Good Friday.
Is a recession looming?
Wall Street skyrockets after Trump announces tariff delay. But gains remain limited as Trade War with China continues. Recession odds have eased, but investors remain fearful. The worst may not be over, deeper market wounds still possible.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.