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30
12, 2024
Euro looks to extend sideways action
- EUR/USD continues to trade in a narrow channel above 1.0400.
- The near-term technical outlook fails to offer a directional clue.
- Cautious comments from ECB officials help the Euro stay resilient against its rivals.
After ending the holiday-shortened week virtually unchanged, EUR/USD extends its sideways grind slightly above 1.0400 in the European session on Monday. The pair is likely to remain stuck in a tight range, with trading conditions unlikely to normalize until after the New Year holiday.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | -0.06% | 0.93% | 0.23% | 0.20% | -0.13% | 1.04% | |
| EUR | -0.09% | -0.17% | 0.77% | 0.12% | 0.18% | -0.23% | 0.94% | |
| GBP | 0.06% | 0.17% | 0.91% | 0.29% | 0.35% | -0.05% | 1.12% | |
| JPY | -0.93% | -0.77% | -0.91% | -0.65% | -0.65% | -1.02% | 0.05% | |
| CAD | -0.23% | -0.12% | -0.29% | 0.65% | 0.02% | -0.36% | 0.81% | |
| AUD | -0.20% | -0.18% | -0.35% | 0.65% | -0.02% | -0.41% | 0.76% | |
| NZD | 0.13% | 0.23% | 0.05% | 1.02% | 0.36% | 0.41% | 1.13% | |
| CHF | -1.04% | -0.94% | -1.12% | -0.05% | -0.81% | -0.76% | -1.13% |
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 an interview with Austrian newspaper Kurier over the weekend, European Central Bank (ECB) Governing Council member Robert Holzmann said that it might take more time until the ECB cuts rates again. “There are signs of an upward trend in some energy prices. But there are also other scenarios as to how inflation could return, like via a stronger devaluation of the euro,” Holzmann elaborated.
These comments seem to be helping the Euro hold its ground. In the second half of the day, Pending Home Sales for November and Chicago Purchasing Managers Index for December will be featured in the US economic calendar. These data, however, are unlikely to influence the US Dollar’s (USD) valuation in a noticeable way.
In the meantime, US stock index futures trade in negative territory, reflecting a cautious market mood. In case Wall Street’s main indexes turn south after the opening bell, EUR/USD could have a hard time keeping its footing.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds slightly above 50 and EUR/USD stays above the 20 and the 50-period Simple Moving Averages (SMA), reflecting a lack of seller interest.
EUR/USD could face first resistance at 1.0440 (static level) before 1.0470 (100-period SMA) and 1.0500 (200-period SMA). On the downside, 1.0400 (round level, static level) could be seen as interim support ahead of 1.0350 (static level) and 1.0300 (static level, round level).
Euro FAQs
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%).
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.
