EUR/USD Forecast: Euro shows no signs of a rebound
- EUR/USD seems to have entered a consolidation phase near 1.1050.
- The technical outlook doesn't yet suggest that the pair is looking to recover.
- The US economic calendar will not feature any high-tier data releases.
After ending the previous week on a bearish note, EUR/USD remained under bearish pressure and closed in negative territory on Monday. The pair holds steady at around 1.1050 early Tuesday as investors move to the sidelines ahead of this week's key events.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.44% | 0.30% | 0.90% | 0.04% | 0.16% | 0.39% | 0.47% | |
| EUR | -0.44% | -0.19% | 0.52% | -0.39% | -0.33% | -0.03% | 0.01% | |
| GBP | -0.30% | 0.19% | 0.58% | -0.20% | -0.14% | 0.14% | 0.20% | |
| JPY | -0.90% | -0.52% | -0.58% | -0.85% | -0.72% | -0.52% | -0.23% | |
| CAD | -0.04% | 0.39% | 0.20% | 0.85% | 0.16% | 0.33% | 0.59% | |
| AUD | -0.16% | 0.33% | 0.14% | 0.72% | -0.16% | 0.28% | 0.31% | |
| NZD | -0.39% | 0.03% | -0.14% | 0.52% | -0.33% | -0.28% | 0.07% | |
| CHF | -0.47% | -0.01% | -0.20% | 0.23% | -0.59% | -0.31% | -0.07% |
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).
Rising US Treasury bond yields helped the US Dollar outperform its rivals in the first half of the day on Monday. Although the improving risk mood limited the USD's gains in the American session, EUR/USD still lost nearly 0.5% on a daily basis.
The US economic calendar will not feature any macroeconomic data releases that could influence the USD's valuation on Tuesday. Hence, investors could remain focused on risk perception. At the time of press, US stock index futures were trading little changed on the day. In case safe-haven flows return to markets ahead of the Presidential Debate, EUR/USD could have a difficult time holding its ground.
Nevertheless, investors could refrain from taking large positions while waiting for the Consumer Price Index data from the US and the European Central Bank's (ECB) policy announcements later in the week.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40 and EUR/USD trades well below the 20, 50 and the 100-period Simple Moving Averages (SMA).
The Fibonacci 38.2% retracement of the latest uptrend aligns as immediate support at 1.1040. If this support fails, 1.1000-1.0990 (Fibonacci 50% retracement, psychological level, 200-period SMA) could be seen as next bearish target before 1.0940 (Fibonacci 61.8% retracement).
On the upside, first resistance is located at 1.1070 (20-period SMA, 50-period SMA) before 1.1100 (Fibonacci 23.6% retracement, 100-period SMA) and 1.1160 (static level).
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.
