EUR/USD Forecast: Euro needs to clear 1.1200 to extend uptrend
- EUR/USD edges higher in the European session on Monday.
- 1.1200 aligns as next critical resistance for the pair.
- Fed Chairman Powell will be delivering a speech later in the day.
After ending the previous week virtually unchanged, EUR/USD gains traction in the European session and rises toward 1.1200.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.30% | -0.34% | 0.10% | 0.04% | -0.35% | -0.34% | 0.13% | |
| EUR | 0.30% | -0.03% | 0.40% | 0.36% | 0.00% | -0.01% | 0.51% | |
| GBP | 0.34% | 0.03% | 0.55% | 0.39% | 0.03% | 0.00% | 0.53% | |
| JPY | -0.10% | -0.40% | -0.55% | 0.00% | -0.50% | -0.40% | 0.10% | |
| CAD | -0.04% | -0.36% | -0.39% | -0.01% | -0.34% | -0.38% | 0.15% | |
| AUD | 0.35% | -0.01% | -0.03% | 0.50% | 0.34% | -0.02% | 0.52% | |
| NZD | 0.34% | 0.01% | -0.01% | 0.40% | 0.38% | 0.02% | 0.50% | |
| CHF | -0.13% | -0.51% | -0.53% | -0.10% | -0.15% | -0.52% | -0.50% |
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).
The Euro seems to be gathering strength following the regional inflation data from Germany. In September, the Consumer Price Index (CPI) in Saxony rose 0.2% on a monthly basis after declining 0.2% in August, while the CPI in Bavaria increased 0.1% in the same period. Later in the session, Germany's Destatis will publish the nationwide CPI data.
In the early American trading hours, European Central Bank (ECB) President Christine Lagarde will testify before the European Parliament. In case Lagarde leaves the door open to a rate cut at the next policy meeting, the immediate market reaction could cause the Euro to come under pressure. On the other hand, the currency could preserve its strength if Lagarde refrains from committing to further policy-easing at least until the last meeting of the year.
In the second half of the day, the US economic calendar will feature the Chicago Purchasing Managers' Index and Dallas Fed Manufacturing Business Index data for September. Investors are likely to ignore these releases and stay focused on Federal Reserve (Fed) Chairman Jerome Powell's speech later in the day.
Powell will speak on the economic outlook while participating in a moderated discussion titled "A View from the Federal Reserve Board" at the National Association for Business Economics Annual Meeting, in Nashville, starting at 17:00 GMT. The CME FedWatch Tool shows that markets are pricing in a nearly 50% probability of another 50 basis points rate cut at the next meeting in November. If Powell pushes back the market positioning by voicing their willingness to continue to ease the policy in a gradual way, the US Dollar (USD) could find a foothold and limit EUR/USD's upside.
EUR/USD Technical Analysis
EUR/USD trades within a touching distance of 1.1200 (static level). In case the pair rises above this level and starts using it as support, it could continue to stretch higher. In this scenario, 1.1275 (July 18, 2023, high) could be seen as next resistance before 1.1300 (round level). In the meantime, the Relative Strength Index (RSI) recently rose above 60, pointing to a buildup of a bullish momentum and suggesting that the pair has more room on the upside before turning technically overbought.
On the downside, 1.1160 (50-period Simple Moving Average (SMA) on the 4-hour chart, static level) aligns as first support before 1.1110-1.1100 (100-period SMA, 200-period SMA).
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.
