EUR/USD holds losses amid strong US data, easing geopolitical tensions
- EUR/USD picks up from 1.1775 but is failing to find acceptance above 1.1820.
- News of a trade deal with India and upcoming talks with Iran are supporting the US Dollar.
- A partial US government shutdown will delay key US labour data scheduled for this week.
The Euro (EUR) posts marginal gains against the US Dollar (USD) on Tuesday, trading right above 1.1800 at the time of writing, but so far unable to find acceptance above 1.1820. Strong manufacturing data in the US and news of a trade deal between the US and India provided additional support to the US Dollar on Monday and eased concerns about a partial US government shutdown.
US President Donald Trump announced a deal with India that will reduce tariffs on Indian products to 18% from the current 50%. Beyond that, Iran's president, Masoud Pezeshkian, said on Tuesday that Tehran will start nuclear negotiations with the US, which has contributed to easing tensions in the region, and provided additional support to the Greenback.
Macroeconomic data was also US Dollar supportive on Monday. The US ISM Manufacturing Purchasing Managers' Index (PMI) improved beyond expectations, offsetting concerns about a partial government shutdown that will delay Friday's Nonfarm Payrolls (NFP) report.
In the economic calendar on Tuesday, the main focus will be on the Federal Reserve (Fed) Governor Michelle Bowman's speech, ahead of Wednesday's US ADP Employment report, which will be observed with particular interest, and Thursday's European Central Bank (ECB) monetary policy decision.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | -0.09% | 0.11% | 0.07% | -0.82% | -0.55% | -0.17% | |
| EUR | 0.07% | -0.01% | 0.17% | 0.14% | -0.75% | -0.48% | -0.09% | |
| GBP | 0.09% | 0.01% | 0.19% | 0.15% | -0.74% | -0.46% | -0.07% | |
| JPY | -0.11% | -0.17% | -0.19% | -0.03% | -0.92% | -0.66% | -0.26% | |
| CAD | -0.07% | -0.14% | -0.15% | 0.03% | -0.88% | -0.62% | -0.22% | |
| AUD | 0.82% | 0.75% | 0.74% | 0.92% | 0.88% | 0.28% | 0.67% | |
| NZD | 0.55% | 0.48% | 0.46% | 0.66% | 0.62% | -0.28% | 0.39% | |
| CHF | 0.17% | 0.09% | 0.07% | 0.26% | 0.22% | -0.67% | -0.39% |
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).
Daily Digest market Movers: The Dollar strengthens further on upbeat US data
- A firmer US Dollar drew additional support from factory data released on Monday. The US ISM Manufacturing PMI rose to 52.6 in January, its best reading in more than three years, from 47.9 in December and beating expectations of a 48.5 reading.
- Likewise, the US S&P Global Manufacturing PMI was revised up to 52.4 in January from the 51.9 reading released by preliminary estimations.
- Also on Monday, Trump announced a trade deal with China, by which the Asian country commits to buy US Oil, defence goods, and aircraft, and partially open its agriculture sector to US products in exchange for reduced trade tariffs.
- Investors have shrugged off a partial government shutdown after Congress failed to approve funding for some of the federal agencies. The Senate has approved the bill to reopen these agencies, which now heads to the House of Representatives, which is expected to vote on Tuesday. Labour data for this week, including JOTLS Job Openings and the Nonfarm Payrolls reports, will be delayed.
Technical Analysis: EUR/USD remains weak with 1.1770 support in play
The EUR/USD has bounced up from lows, but the immediate trend remains bearish. The Relative Strength Index (RSI) in the 4-hour chart is pointing upwards around 40, highlighting a fading bearish momentum. In the same line, the Moving Average Convergence Divergence (MACD) histogram is showing contracting red bars, which suggests that selling pressure has eased somewhat.
The pair has found some footing, although bulls are likely to be challenged at Monday's high of 1.1875. Further up, the target is the January 30 high near 1.1975, ahead of the 1.2000 round level.
On the downside, support at the 1.1770 area (January 20 high) remains on the bears' focus. A confirmation below that level would add pressure towards the January 21, 22 lows near the 1.1665 area.
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.
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
