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21
06, 2024
Euro tests key support after weak PMI data
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- EUR/USD stays under bearish pressure and trades below 1.0700.
- PMI data from the Euro area highlight a loss of growth momentum in early June.
- The pair could extend its slide if 1.0670 support fails.
EUR/USD struggles to hold its ground early Friday and trades below 1.0700 after closing in negative territory on Thursday. The pair could continue to stretch lower in case 1.0670 support fails.
The risk-averse market atmosphere helped the US Dollar (USD) gather strength on Thursday, forcing EUR/USD to stay on the back foot.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.22% | 0.30% | 0.84% | -0.38% | -0.58% | 0.12% | 0.08% | |
| EUR | -0.22% | 0.11% | 0.64% | -0.59% | -0.89% | -0.05% | -0.14% | |
| GBP | -0.30% | -0.11% | 0.66% | -0.70% | -1.01% | -0.20% | -0.22% | |
| JPY | -0.84% | -0.64% | -0.66% | -1.10% | -1.40% | -0.57% | -0.69% | |
| CAD | 0.38% | 0.59% | 0.70% | 1.10% | -0.26% | 0.50% | 0.47% | |
| AUD | 0.58% | 0.89% | 1.01% | 1.40% | 0.26% | 0.90% | 0.79% | |
| NZD | -0.12% | 0.05% | 0.20% | 0.57% | -0.50% | -0.90% | -0.03% | |
| CHF | -0.08% | 0.14% | 0.22% | 0.69% | -0.47% | -0.79% | 0.03% |
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).
Early Friday, disappointing PMI data from Germany and the Eurozone make it difficult for the Euro to find demand. HCOB Composite PMI in Germany declined to 50.6 in June’s flash estimate from 52.4 in May and HCOC Composite PMI for the Eurozone declined to 50.8 from 52.2. Both of these readings came in below analysts’ estimates and showed that the private sector’s business activity continued to expand at a softening pace.
Assessing PMI surveys’ findings, “the HCOB PMI do not provide ammunition for another rate cut in July by the ECB,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “This is because, for the biggest Eurozone economy, Germany, service providers increased their selling prices at a sharper pace than in May.”
In the second half of the day, S&P Global will release preliminary Manufacturing and Services PMI data for the US. In case the US PMI data come in better than expected, the USD could preserve its strength heading into the weekend and cause EUR/USD to stretch lower. On the other hand, a noticeable decline in either the Manufacturing or the Services PMI reading could limit the USD’s gains.
EUR/USD Technical Analysis
The Fibonacci 78.6% retracement of the latest uptrend aligns as key support at 1.0670. If EUR/USD falls below that level and starts using it as resistance, technical sellers could remain interested. In this scenario, 1.0600 (static level) could be set as the next bearish target.
On the upside, 1.0700 (psychological level, static level) could be seen as interim resistance before 1.0730-1.0740 (Fibonacci 61.8% retracement, 50-period Simple Moving Average) and 1.0760 (Fibonacci 50% retracement).
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.
- EUR/USD stays under bearish pressure and trades below 1.0700.
- PMI data from the Euro area highlight a loss of growth momentum in early June.
- The pair could extend its slide if 1.0670 support fails.
EUR/USD struggles to hold its ground early Friday and trades below 1.0700 after closing in negative territory on Thursday. The pair could continue to stretch lower in case 1.0670 support fails.
The risk-averse market atmosphere helped the US Dollar (USD) gather strength on Thursday, forcing EUR/USD to stay on the back foot.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.22% | 0.30% | 0.84% | -0.38% | -0.58% | 0.12% | 0.08% | |
| EUR | -0.22% | 0.11% | 0.64% | -0.59% | -0.89% | -0.05% | -0.14% | |
| GBP | -0.30% | -0.11% | 0.66% | -0.70% | -1.01% | -0.20% | -0.22% | |
| JPY | -0.84% | -0.64% | -0.66% | -1.10% | -1.40% | -0.57% | -0.69% | |
| CAD | 0.38% | 0.59% | 0.70% | 1.10% | -0.26% | 0.50% | 0.47% | |
| AUD | 0.58% | 0.89% | 1.01% | 1.40% | 0.26% | 0.90% | 0.79% | |
| NZD | -0.12% | 0.05% | 0.20% | 0.57% | -0.50% | -0.90% | -0.03% | |
| CHF | -0.08% | 0.14% | 0.22% | 0.69% | -0.47% | -0.79% | 0.03% |
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).
Early Friday, disappointing PMI data from Germany and the Eurozone make it difficult for the Euro to find demand. HCOB Composite PMI in Germany declined to 50.6 in June’s flash estimate from 52.4 in May and HCOC Composite PMI for the Eurozone declined to 50.8 from 52.2. Both of these readings came in below analysts’ estimates and showed that the private sector’s business activity continued to expand at a softening pace.
Assessing PMI surveys’ findings, “the HCOB PMI do not provide ammunition for another rate cut in July by the ECB,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “This is because, for the biggest Eurozone economy, Germany, service providers increased their selling prices at a sharper pace than in May.”
In the second half of the day, S&P Global will release preliminary Manufacturing and Services PMI data for the US. In case the US PMI data come in better than expected, the USD could preserve its strength heading into the weekend and cause EUR/USD to stretch lower. On the other hand, a noticeable decline in either the Manufacturing or the Services PMI reading could limit the USD’s gains.
EUR/USD Technical Analysis
The Fibonacci 78.6% retracement of the latest uptrend aligns as key support at 1.0670. If EUR/USD falls below that level and starts using it as resistance, technical sellers could remain interested. In this scenario, 1.0600 (static level) could be set as the next bearish target.
On the upside, 1.0700 (psychological level, static level) could be seen as interim resistance before 1.0730-1.0740 (Fibonacci 61.8% retracement, 50-period Simple Moving Average) and 1.0760 (Fibonacci 50% retracement).
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.
