EUR/USD Price Analysis: The first upside barrier emerges near 1.0900
|- EUR/USD trades on a stronger note around 1.0885 in Monday’s early European session.
- The pair keeps the bullish vibe above the 100-period EMA, but the RSI indicator holds in bearish territory.
- The first downside target is seen at 1.0865; the immediate resistance level is located at 1.0900.
The EUR/USD pair trades with mild gains near 1.0885 during the early European session on Monday. The European Central Bank (ECB) left rates unchanged in July and maintained a data-dependent approach. ECB President Christine Lagarde reiterated that the central bank will maintain a restrictive policy stance as long as necessary to achieve the 2% inflation target.
According to the 4-hour chart, the EUR/USD pair maintains a positive stance unchanged above the key 100-period Exponential Moving Average (EMA). However, the Relative Strength Index (RSI) stands in bearish territory near 43.0, suggesting that further downside cannot be ruled out.
The initial support level for the major pair will emerge near the lower limit of the Bollinger Band at 1.0865. Further south, the next contention level is located at 1.0850, the 100-period EMA. Any follow-through selling below this level will see a drop to the 1.0800 psychological mark.
On the upside, a decisive break above the 1.0900 round figure will pave the way to 1.0950, the upper boundary of the Bollinger Band. Extended gains will expose 1.0981, a high of March 8. The crucial resistance level to watch is the 1.1000 level.
EUR/USD 4-hour chart
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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