EUR/USD Forecast: Euro sets trading range before next breakout

EUR/USD trades in a tight range below 1.0950 to start the new week.
European Central Bank (ECB) will announce monetary policy decisions on Thursday.
The pair's action is likely to remain subdued in the near term.

EUR/USD moves up and down in a narrow range below 1.0950 in the European session on Monday after posting marginal losses in the previous week. The near-term technical outlook suggests that the bearish bias remains intact but the pair could have a difficult time gathering directional momentum.

Euro PRICE Last 7 days

The table below shows the percentage change of Euro (EUR) against listed major currencies last 7 days. Euro was the weakest against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.41%	0.41%	0.46%	1.59%	0.99%	1.21%	0.12%
EUR	-0.41%		0.07%	0.08%	1.22%	0.56%	0.79%	-0.31%
GBP	-0.41%	-0.07%		-0.02%	1.16%	0.49%	0.76%	-0.26%
JPY	-0.46%	-0.08%	0.02%		1.12%	0.51%	0.68%	-0.31%
CAD	-1.59%	-1.22%	-1.16%	-1.12%		-0.57%	-0.38%	-1.45%
AUD	-0.99%	-0.56%	-0.49%	-0.51%	0.57%		0.27%	-0.83%
NZD	-1.21%	-0.79%	-0.76%	-0.68%	0.38%	-0.27%		-1.04%
CHF	-0.12%	0.31%	0.26%	0.31%	1.45%	0.83%	1.04%

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).

Mixed macroeconomic data releases from the US made it difficult for the US Dollar (USD) to preserve its bullish momentum last week, allowing EUR/USD to hold its ground. Although the Consumer Price Index and Producer Price Index figures for September arrived slightly above analysts' estimates, the disappointing Initial Jobless Claims data revived concerns over a further softening of labor market conditions.

The economic calendar will not feature any high-tier data releases on Monday. Additionally, bond markets in the US will remain closed in observance of the Columbus Day holiday. Hence, EUR/USD is likely to extend its sideways grind in the second half of the day.

On Thursday, the European Central Bank (ECB) will announce monetary policy decisions. Investors could refrain from taking large positions ahead of this key event.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays flat below 50, suggesting that the pair struggles to attract buyers, while consolidating the recent losses.

EUR/USD faces a pivot point at 1.0950, where Fibonacci 61.8% retracement of the latest uptrend is located. Once this level is confirmed as support, 1.1000 (Fibonacci 50% retracement) and 1.1050 (Fibonacci 38.2% retracement) could be seen as next resistance levels.

In case EUR/USD fails to reclaim 1.0950 and continues to use this level as resistance, supports could be spotted at 1.0900 (round level), 1.0870 (Fibonacci 78.6% retracement) and 1.0800 (round level).

Euro FAQs

What is the Euro?

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%).

What is the ECB and how does it impact the Euro?

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.

How does inflation data impact the value of the Euro?

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.

How does economic data influence the value of the Euro?

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.

How does the Trade Balance impact the Euro?

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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