EUR/USD Forecast: Euro remains fragile ahead of US data
- EUR/USD struggles to recover above 1.0700 following two-day decline.
- US economic docket will feature key data releases on Thursday.
- The US Dollar is likely to benefit from risk aversion.
EUR/USD extended its slide and touched its weakest level since early May slightly below 1.0670 on Wednesday. Although the pair edged higher early Thursday, it lost its recovery momentum after meeting resistance near 1.0700.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | 0.07% | 0.48% | -0.05% | -0.36% | 0.37% | 0.43% | |
| EUR | -0.04% | 0.05% | 0.51% | -0.05% | -0.38% | 0.38% | 0.47% | |
| GBP | -0.07% | -0.05% | 0.41% | -0.11% | -0.43% | 0.33% | 0.41% | |
| JPY | -0.48% | -0.51% | -0.41% | -0.53% | -0.81% | -0.06% | -0.05% | |
| CAD | 0.05% | 0.05% | 0.11% | 0.53% | -0.29% | 0.44% | 0.52% | |
| AUD | 0.36% | 0.38% | 0.43% | 0.81% | 0.29% | 0.76% | 0.85% | |
| NZD | -0.37% | -0.38% | -0.33% | 0.06% | -0.44% | -0.76% | 0.08% | |
| CHF | -0.43% | -0.47% | -0.41% | 0.05% | -0.52% | -0.85% | -0.08% |
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 US Bureau of Economic Analysis (BEA) will release the final revisions to the first-quarter Gross Domestic Product (GDP) growth. The BEA is forecast to revise annualized GDP growth to 1.4% in Q1 from 1.3% in the previous estimate.
Other data releases from the US will include Durable Goods Orders for May, which is expected to decline 0.1%, weekly Initial Jobless Claims and Pending Home Sales for May.
Investors forecast the number of first-time applications for unemployment benefits to arrive at 236,000 in the week ending June 22, down slightly from 238,000 reported in the previous week. A reading above 240,000 could highlight loosening conditions in the labor market and cause the US Dollar (USD) to weaken against its rivals.
In the second half of the day, investors will pay close attention to the risk perception. US stock index futures were last seen losing about 0.3% on the day. In case safe-haven flows dominate the financial markets ahead of the first US Presidential Debate, the USD could outperform its rivals even if macroeconomic data releases disappoint.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour edged higher but turned sideways near 40, highlighting a lack of recovery momentum.
Wednesday's price action confirmed 1.0670, the Fibonacci 78.6% retracement of the latest uptrend, as strong support. In case EUR/USD drops below this level and starts using it as resistance, 1.0600 (psychological level, static level) could be set as the next bearish target.
On the upside, 1.0700 (psychological level, static level) could be seen as interim resistance before 1.0730 (Fibonacci 61.8% retracement) and 1.0760 (Fibonacci 50% retracement, 100-period Simple Moving Average).
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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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.
