EUR/USD Forecast: Euro could extend rebound while 1.0700 support holds
- EUR/USD trades above 1.0700 in the European session on Thursday.
- 1.0730 aligns as first resistance for the pair.
- US GDP data will be watched closely by market participants later in the day.
EUR/USD gained traction and climbed to its highest level in over 10 days above 1.0720 early Thursday. The pair's technical outlook suggests that the pair has more room on the upside before turning overbought in the near term.
Euro price this week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.60% | -1.04% | -0.45% | -1.53% | 0.64% | -0.98% | 0.27% | |
| EUR | 0.58% | -0.45% | 0.14% | -0.92% | 1.22% | -0.38% | 0.83% | |
| GBP | 1.04% | 0.45% | 0.58% | -0.47% | 1.67% | 0.07% | 1.27% | |
| CAD | 0.44% | -0.15% | -0.60% | -1.08% | 1.08% | -0.53% | 0.69% | |
| AUD | 1.50% | 0.92% | 0.48% | 1.06% | 2.12% | 0.54% | 1.78% | |
| JPY | -0.63% | -1.23% | -1.68% | -1.08% | -2.16% | -1.61% | -0.36% | |
| NZD | 0.97% | 0.38% | -0.07% | 0.53% | -0.54% | 1.59% | 1.23% | |
| CHF | -0.24% | -0.84% | -1.30% | -0.69% | -1.77% | 0.39% | -1.21% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The renewed selling pressure surrounding the US Dollar (USD) helps EUR/USD hold its ground in the European trading hours. Although US stock index futures trade deep in negative territory, the USD struggles to find demand.
The Nasdaq Futures were last seen losing more than 1% on the day. This, however, seems to be a product of the sharp decline seen in technology shares following disappointing earnings reports, rather than a general risk aversion.
Later in the day, the US Bureau of Economic Analysis will release its first estimate of the annualized real Gross Domestic Product (GDP) growth for the first quarter. Investors expect the US economy to grow 2.5% following the 3.4% expansion recorded in the last quarter of 2023.
In case the data shows that the US economy grew at a softer pace than forecast in Q1, the initial reaction could cause the USD to continue to weaken against its rivals. On the other hand, a GDP reading at or above the market expectation could support the USD and weigh on EUR/USD.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart is yet to climb above 70, suggesting that EUR/USD has more room on the upside before it turns technically overbought.
The 100-period Simple Moving Average (SMA) aligns as immediate resistance at 1.0730 before 1.0750 (Fibonacci 38.2% retracement of the latest downtrend). In case EUR/USD manages to clear the latter, it could target 1.0790 (200-period SMA, Fibonacci 50% retracement) next.
On the downside, 1.0700 (Fibonacci 23.6% retracement) could be seen as first support before 1.0660 (50-period SMA) and 1.0635 (static level).
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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
