EUR/USD Forecast: Euro could lose traction on upbeat US PMI data
- EUR/USD rebounds from weekly lows, trades above 1.1400.
- The near-term technical outlook is yet to point to a buildup of bullish momentum.
- The US economic calendar will feature preliminary PMI data for April.
EUR/USD came under bearish pressure and closed deep in negative territory on Tuesday. After extending its decline to a fresh weekly low near 1.1300 in the Asian session on Wednesday, the pair regained its traction and recovered above 1.1400 in the European session.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.21% | -0.18% | -0.21% | -0.32% | -0.48% | -1.07% | 0.62% | |
| EUR | 0.21% | -0.13% | -0.03% | -0.16% | -0.45% | -0.90% | 0.82% | |
| GBP | 0.18% | 0.13% | 0.26% | -0.03% | -0.34% | -0.78% | 0.94% | |
| JPY | 0.21% | 0.03% | -0.26% | -0.11% | -0.38% | -0.73% | 0.87% | |
| CAD | 0.32% | 0.16% | 0.03% | 0.11% | -0.27% | -0.74% | 0.97% | |
| AUD | 0.48% | 0.45% | 0.34% | 0.38% | 0.27% | -0.42% | 1.25% | |
| NZD | 1.07% | 0.90% | 0.78% | 0.73% | 0.74% | 0.42% | 1.76% | |
| CHF | -0.62% | -0.82% | -0.94% | -0.87% | -0.97% | -1.25% | -1.76% |
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).
US President Donald Trump said at a press conference late Tuesday that he had no intention of firing Federal Reserve (Fed) Chairman Jerome Powell, despite being frustrated with high interest rates. This comment eased fears over the Fed losing its independence and helped the US Dollar (USD) erase a large part of Monday's losses.
The data from the Eurozone showed on Wednesday that the business activity in the service sector contracted in April, with the flash HCOB Services Purchasing Managers (PMI) Index dropping to 49.7 from 51 in March. In the same period, the HCOB Composite PMI declined to 50.1 from 50.9.
Assessing the survey's details, "the European Central Bank is getting some mild support for its rate-cutting stance from the price indicators in the services sector, which the monetary authorities are closely watching," said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. "Costs have risen at a similar rate to March, but the increase in selling prices has slowed significantly."
In the second half of the day, the US economic calendar will feature preliminary S&P Global PMI data. In case both the Manufacturing and Services PMIs arrive above 50, the USD could stay resilient against its rivals and make it difficult for EUR/USD to extend its recovery. On the other hand, the USD could come under additional selling pressure if the details of the survey highlight a significant deterioration in the private sector's sentiment due to the uncertainty created by the Trump administration's new tariff regime.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50, reflecting a neutral stance in the near term. Additionally, EUR/USD rose above the 50-period Simple Moving Average (SMA) but it's yet to clear the 20-period SMA.
Looking north, immediate resistance could be spotted at 1.1450 (20-period SMA, static level) before 1.1500 (round level) and 1.1550 (mid-point of the ascending channel). On the downside, 1.1360 (lower limit of the ascending channel) aligns as first support ahead of 1.1300 (static level, round level).
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.
