EUR/USD Forecast: Euro stabilizes but near-term outlook remains bearish

Euro holds steady at around 1.1050 in the European session on Wednesday.
The US economic calendar will feature JOLTS Job Openings data.
The pair's near-term technical outlook remain bearish midweek.

After closing marginally lower on Tuesday, EUR/USD holds steady near 1.1050 during the European trading hours on Wednesday. The pair's technical outlook suggests that the bearish bias remains intact.

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 Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.03%	0.07%	-0.71%	0.47%	0.86%	0.96%	-0.05%
EUR	0.03%		0.12%	-0.69%	0.47%	0.89%	0.97%	-0.03%
GBP	-0.07%	-0.12%		-0.82%	0.34%	0.74%	0.88%	-0.18%
JPY	0.71%	0.69%	0.82%		1.13%	1.60%	1.80%	0.59%
CAD	-0.47%	-0.47%	-0.34%	-1.13%		0.42%	0.49%	-0.52%
AUD	-0.86%	-0.89%	-0.74%	-1.60%	-0.42%		0.08%	-0.91%
NZD	-0.96%	-0.97%	-0.88%	-1.80%	-0.49%	-0.08%		-1.00%
CHF	0.05%	0.03%	0.18%	-0.59%	0.52%	0.91%	1.00%

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 negative shift seen in risk mood helped the US Dollar stay resilient against its major rivals on Tuesday and made it difficult for EUR/USD to stage a rebound. Meanwhile, the data from the US showed that the business activity in the manufacturing sector continued to contract in August, albeit at a slightly softer pace than it did in July.

The US Bureau of Labor Statistics will release JOLTS Job Openings data for July later in the day. Market expect the number of job openings to stand at 8.1 million. In case there is a big jump in this data, the immediate market reaction could provide an additional boost to the USD and force EUR/USD to stretch lower. On the other hand, a reading below 8 million could limit the USD's upside.

In the meantime, US stock index futures were last seen losing between 0.2% and 0.6% on the day. If Wall Street's main indexes open deep in the red and continue to push lower, EUR/USD could stay on the back foot regardless of the immediate reaction to the JOLTS Job Openings data.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 40 after edging higher on Tuesday, reflecting a lack of buyer interest. On the downside, the pair could face first support at 1.1040 (Fibonacci 38.2% retracement of the latest uptrend) before 1.1000 (psychological level, Fibonacci 50% retracement) and 1.0975 (200-period SMA).

The 100-period Simple Moving Average (SMA) aligns as immediate resistance at 1.1075 ahead of 1.1100-1.1110 (Fibonacci 23.6% retracement, 50-period SMA) and 1.1160 (static level).

Euro FAQs

What is the Euro?

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%).

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.

(This story was corrected on September 4 at 09:38 GMT to remove a reference to downtrend when mentioning the Fibonacci 23.6% retracement level in the last paragraph.)

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