Euro recovery loses steam ahead of US data
EUR/USD stays in a consolidation phase above 1.1500 in the European session on Friday after rising nearly 0.5% on Thursday. As market participants await the University of Michigan’s (UoM) Consumer Sentiment data for November, the pair’s technical outlook highlights buyers’ hesitancy.
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 | -0.01% | 0.14% | -0.40% | 0.74% | 0.95% | 2.11% | 0.39% | |
| EUR | 0.01% | 0.16% | -0.28% | 0.75% | 0.95% | 2.13% | 0.40% | |
| GBP | -0.14% | -0.16% | -0.60% | 0.59% | 0.79% | 1.96% | 0.24% | |
| JPY | 0.40% | 0.28% | 0.60% | 1.09% | 1.32% | 2.49% | 0.90% | |
| CAD | -0.74% | -0.75% | -0.59% | -1.09% | 0.15% | 1.34% | -0.33% | |
| AUD | -0.95% | -0.95% | -0.79% | -1.32% | -0.15% | 1.17% | -0.51% | |
| NZD | -2.11% | -2.13% | -1.96% | -2.49% | -1.34% | -1.17% | -1.69% | |
| CHF | -0.39% | -0.40% | -0.24% | -0.90% | 0.33% | 0.51% | 1.69% |
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 the official employment report, because of the ongoing government shutdown in the US, investors scrutinize data that could provide fresh insights into the labor market conditions.
On Thursday, Challenger, Gray & Christmas reported that US-based employers cut more than 150,000 jobs in October. This marked the biggest reduction for the month in over two decades. The underlying details of the publication showed that tech firms, retailers and the services sector led the job cuts in this period. With this report reviving concerns over worsening conditions in the labor market, the USD came under selling pressure on Thursday and helped EUR/USD push higher.
Early Friday, the USD corrects higher and limits EUR/USD’s upside. In the second half of the day, markets will pay close attention to the UoM Consumer Sentiment data. A noticeable deterioration in consumer confidence could make it difficult for the USD to stay resilient against its rivals heading into the weekend. On the other hand, an improvement in the headline print, combined with an uptick in the 1-year Consumer Inflation Expectations component of the report, could support the USD and weigh on EUR/USD.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart declines toward 50, reflecting buyers’ hesitancy. Additionally, EUR/USD started to edge lower after coming within a touching distance of the 50-perios Simple Moving Average (SMA).
On the downside, 1.1500 (Fibonacci 78.6% retracement of the latest uptrend) aligns as the first support level before 1.1450 (static level) and 1.1425 (lower limit of the descending regression channel).
Looking north, resistance levels could be spotted at 1.1550 (50-period SMA), 1.1580 (Fibonacci 61.8% retracement) and 1.1600-1.1610 (100-period SMA, upper limit of the descending channel).
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.
