EUR/USD Forecast: Euro sellers could take action if 1.0670 support fails
- Euro stays on the back foot near 1.0700 after posting losses on Tuesday.
- EUR/USD could extend its slide if 1.0670 support fails.
- An improving risk mood could help the pair limit its losses in the near term.
EUR/USD failed to build on Monday's gains and closed in negative territory on Tuesday. The pair struggles to regain its traction and trades at around 1.0700 in the European session on Wednesday.
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 | 0.00% | -0.18% | 0.10% | -0.14% | -0.57% | 0.20% | 0.37% | |
| EUR | -0.01% | -0.17% | 0.15% | -0.11% | -0.56% | 0.24% | 0.43% | |
| GBP | 0.18% | 0.17% | 0.28% | 0.05% | -0.40% | 0.40% | 0.59% | |
| JPY | -0.10% | -0.15% | -0.28% | -0.24% | -0.64% | 0.18% | 0.26% | |
| CAD | 0.14% | 0.11% | -0.05% | 0.24% | -0.42% | 0.34% | 0.54% | |
| AUD | 0.57% | 0.56% | 0.40% | 0.64% | 0.42% | 0.80% | 1.00% | |
| NZD | -0.20% | -0.24% | -0.40% | -0.18% | -0.34% | -0.80% | 0.19% | |
| CHF | -0.37% | -0.43% | -0.59% | -0.26% | -0.54% | -1.00% | -0.19% |
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).
In the absence of high-tier macroeconomic data releases, investors refrain from taking large positions. The US economic docket will feature New Home Sales data for May later in the day, which is unlikely to trigger a significant market reaction.
Meanwhile, US stock index futures trade marginally higher on the day. In case risk flows dominate the markets in the second half of the day, the US Dollar (USD) could lose strength and help EUR/USD limit its losses.
Nevertheless, market participants could remain hesitant to bet on a steady Euro recovery ahead of this weekend's election in France.
Earlier in the day, European Central Bank (ECB) policymaker Olli Rehn said that market expectations that the ECB will reduce interest rates twice more this year and to as low as 2.25% in 2025 are ‘reasonable’. These comments also seem to be making it difficult for the Euro to find demand.
On Thursday, the European Commission will publish business and consumer sentiment data for June. Later in the day, the US Bureau of Economic Analysis will release the final revision to the first-quarter Gross Domestic Product growth and the US Department of Labor will announce weekly Initial Jobless Claims figures.
EUR/USD Technical Analysis
The Fibonacci 78.6% retracement of the latest uptrend aligns as immediate support at 1.0670. If EUR/USD falls 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, resistances could be seen as 1.0720-1.0730, where the 50-period Simple Moving Average (SMA) on the four-hour chart meets the Fibonacci 61.8% retracement level, and 1.0760 (Fibonacci 50% retracement).
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.
(This story was corrected on June 26 at 09:57 GMT to say that 1.0670 aligns as support for EUR/USD instead of resistance.)
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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.
