EUR/USD Forecast: Risky to bet on a steady Euro recovery
- EUR/USD recovered modestly toward 1.0500 in the European morning on Wednesday.
- Current market developments suggest that the pair could struggle to hold its ground.
- ADP private sector employment and ISM Services PMI data will be featured in the US docket.
EUR/USD recovered modestly toward 1.0500 after touching its lowest level of 2023 below 1.0450. The pair's near term technical outlook suggests that the bearish bias stays intact, with a potential for an upward correction.
Rising US Treasury bond yields helped the US Dollar (USD) preserve its strength on Tuesday and didn't allow EUR/USD to gain traction. In addition to the ongoing US bond sell-off, hawkish Federal Reserve (Fed) bets helped yields stretch higher as investors reacted to tightening conditions in the labor market. The data published by the US Bureau of Labor Statistics revealed that the number of job openings on the last business day of August stood at 9.6 million, much higher than 8.8 million openings recorded in July. According to the CME Group FedWatch Tool, markets see a nearly 40% probability of one more 25 bps Fed rate hike in November.
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 | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.74% | 0.73% | 0.89% | 1.79% | -0.36% | 1.63% | 0.43% | |
| EUR | -0.75% | 0.00% | 0.15% | 1.06% | -1.11% | 0.89% | -0.31% | |
| GBP | -0.74% | 0.01% | 0.16% | 1.06% | -1.11% | 0.89% | -0.31% | |
| CAD | -0.90% | -0.15% | -0.12% | 0.91% | -1.26% | 0.74% | -0.47% | |
| AUD | -1.82% | -1.06% | -1.07% | -0.92% | -2.19% | -0.17% | -1.40% | |
| JPY | 0.35% | 1.10% | 1.10% | 1.26% | 2.13% | 1.99% | 0.80% | |
| NZD | -1.65% | -0.90% | -0.90% | -0.74% | 0.17% | -2.01% | -1.20% | |
| CHF | -0.44% | 0.31% | 0.31% | 0.47% | 1.37% | -0.79% | 1.20% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Meanwhile, investors remain cautious following the ousting of House Speaker Kevin McCarthy late Tuesday. Republicans need to find McCarthy's replacement amid growing uncertainty surrounding the upcoming budget negotiations, especially after several Republicans voted in line with Democrats to remove McCarthy.
In the second half of the day, ADP will release the private sector employment data, which is forecast to show a job growth of 153,000 in September. In case this data disappoints, with a reading close to 100,000, it would contradict the job openings data and could make it difficult for the USD to find demand. The US economic docket will also feature the ISM Services PMI report for September. In case the Prices Paid and Employment sub-indexes of the survey come in well above 50, the USD could stay resilient against its peers.
Unless there is a steady decline in US yields, however, the potential negative impact of the US data on the USD's valuation could remain short-lived.
EUR/USD Technical Analysis
EUR/USD climbed within the descending regression channel early Wednesday and the Relative Strength Index (RSI) indicator on the 4-hour chart rose above 30, suggesting that the pair's latest recovery attempt is a technical correction in nature.
On the upside, 1.0500 (20-period Simple Moving Average (SMA), mid-point of the descending channel, psychological level) aligns as first resistance. Once the pair stabilizes above that level, it could extend its correction toward the upper limit of the descending channel and the 50-period SMA at 1.0550 and 1.0600 (psychological level, static level).
Immediate support is located at 1.0475 (lower limit of the descending channel) before 1.0450 (static level) and 1.0420 (static level from November 2022).
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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.
