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3
10, 2024
Euro could test 1.1000 unless risk mood improves
- EUR/USD struggles to gain traction after closing in the red on Wednesday.
- The near-term technical outlook points to a lack of buyer interest.
- The weekly Initial Jobless Claims and September ISM Services PMI data could drive the pair’s action.
Following Tuesday’s sharp decline, EUR/USD continued to stretch lower and closed in negative territory on Wednesday. The pair extended its slide in the Asian session on Thursday and touched its lowest level in three weeks below 1.1030 before staging a modest rebound toward 1.1050 in the European morning.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.15% | 2.04% | 3.08% | 0.10% | 0.74% | 1.79% | 1.16% | |
| EUR | -1.15% | 0.88% | 1.93% | -1.02% | -0.36% | 0.66% | 0.09% | |
| GBP | -2.04% | -0.88% | 1.15% | -1.88% | -1.22% | -0.22% | -0.78% | |
| JPY | -3.08% | -1.93% | -1.15% | -2.85% | -2.33% | -1.24% | -1.82% | |
| CAD | -0.10% | 1.02% | 1.88% | 2.85% | 0.69% | 1.69% | 1.12% | |
| AUD | -0.74% | 0.36% | 1.22% | 2.33% | -0.69% | 1.01% | 0.43% | |
| NZD | -1.79% | -0.66% | 0.22% | 1.24% | -1.69% | -1.01% | -0.59% | |
| CHF | -1.16% | -0.09% | 0.78% | 1.82% | -1.12% | -0.43% | 0.59% |
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 risk-averse market atmosphere and the upbeat private sector employment data from the US helped the US Dollar (USD) hold its ground midweek and didn’t allow EUR/USD to gain traction.
Meanwhile, cautious comments from European Central Bank (ECB) officials put additional weight on the Euro’s shoulders. ECB Vice President Luis de Guindos said that risks to Eurozone growth remains tilted to the downside and ECB board member Isabel Schnabel noted that they cannot ignore headwinds to growth, adding that a return to the ECB’s 2% inflation target in a timely manner is becoming more likely.
In the early American session, the weekly Initial Jobless data will be featured in the US economic calendar. Markets expect the number of first-time applications for unemployment benefits to come in at 220,000 in the week ending September 28. Ahead of Friday’s critical Nonfarm Payrolls data, a reading close to 200,000 in the weekly Initial Jobless Claims could help the USD gather strength with the immediate reaction.
Later in the day, investors will scrutinize the ISM Services PMI data for September. An unexpected drop below 50 could revive concerns over an economic downturn in the US and make it difficult for the USD to outperform its rivals.
Market participants will also keep a close eye on the risk perception. US stock index futures trade in negative territory in the European session. EUR/USD could stay under bearish pressure if risk-off flows dominate the action in the second half of the day.
EUR/USD Technical Analysis
EUR/USD was last seen trading near 1.1040, where the Fibonacci 38.2% retracement of the latest uptrend is located. In case the pair fails to stabilize above this level, technical sellers could remain interested. On the downside, 1.1000 (Fibonacci 50% retracement) could be seen as next support before 1.0940 (Fibonacci 61.8% retracement).
If EUR/USD manages to reclaim 1.1040, next strong resistance could be seen at 1.1100, where the 100-period and the 200-period Simple Moving Averages (SMA) meet the Fibonacci 23.6% retracement, ahead of 1.1150 (static 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.
