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Euro could continue recovery once it crosses 1.1100

Posted on by Vaseline
Euro could continue recovery once it crosses 1.1100

  • EUR/USD is trading slightly below 1.1100 after closing positive on Wednesday.
  • US jobs figures could spark the next big move for the pair.
  • The technical outlook suggests that sellers remain on the sidelines.

EUR/USD is fluctuating in a narrow range just below 1.1100 after a positive close on Wednesday. Later in the day, US macroeconomic data releases related to employment could influence the valuation of the US dollar (USD) and drive the pair’s action.

Euro PRICE This Week

The table below shows the percentage change of the euro (EUR) against major quoted currencies this week. The euro was strongest against the New Zealand dollar.

US dollar EUR GBP Japanese yen CAD AUD New Zealand CHF
US dollar -0.41% -0.21% -1.68% 0.18% 0.64% 0.76% -0.32%
EUR 0.41% 0.22% -1.29% 0.56% 1.06% 1.17% 0.08%
GBP 0.21% -0.22% -1.51% 0.34% 0.82% 0.97% -0.16%
Japanese yen 1.68% 1.29% 1.51% 1.83% 2.39% 2.61% 1.32%
CAD -0.18% -0.56% -0.34% -1.83% 0.51% 0.58% -0.49%
AUD -0.64% -1.06% -0.82% -2.39% -0.51% 0.09% -0.97%
New Zealand -0.76% -1.17% -0.97% -2.61% -0.58% -0.09% -1.07%
CHF 0.32% -0.08% 0.16% -1.32% 0.49% 0.97% 1.07%

The heatmap shows percentage changes of major currencies relative to each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box represents EUR (base)/USD (quote).

The US dollar came under selling pressure on Wednesday after data released by the US Bureau of Labor Statistics showed the number of job openings stood at 7.67 million on the last business day of July, down from 7.9 million in June and below market expectations of 8.1 million.

Later in the day, the ADP employment change and weekly initial jobless claims data will be included in the US economic file.

Markets expect private sector payrolls to rise by 145,000 in August, following a 122,000 increase in July. A disappointing reading near 100,000 could add to concerns about deteriorating labor market conditions and trigger a fresh sell-off in the USD ahead of Friday’s August jobs report. On the other hand, a positive surprise, with a print of 150,000 or higher, could give the USD a boost and make it difficult for EUR/USD to build on Wednesday’s gains.

Technical analysis EUR/USD

The Relative Strength Index (RSI) indicator on the 4-hours chart is rising towards 60 in the European session on Thursday, reflecting a building bullish momentum. 1.1100 (50-period Simple Moving Average (SMA), Fibonacci 23.6% retracement of the last uptrend) acts as an immediate resistance. In case the pair converts that level into support, 1.1160 (static level) can be seen as the next hurdle before 1.1200 (end of uptrend).

On the downside, the first support lies at 1.1040 (Fibonacci 38.2% retracement) before 1.1000 (psychological level, Fibonacci 50% retracement).

Euro Frequently Asked Questions

The Euro is the currency of the 20 European Union countries that make up the Eurozone. It is the second most traded currency in the world, after the US dollar. In 2022, it accounted for 31% of all currency transactions, with an average daily turnover of more than $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of 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 controlling inflation or stimulating growth. Its primary tool is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher rates – tend to benefit the euro and vice versa. The ECB’s Governing Council takes monetary policy decisions at meetings held eight times a year. Decisions are made by the heads of the eurozone’s national banks and six permanent members, including ECB President Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is a key econometric information for the euro. If inflation rises more than expected, especially if it is above the ECB’s 2% target, it forces the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its peers tend to benefit the euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases measure the health of the economy and can influence the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence surveys can all influence the direction of the eurozone. A strong economy is good for the euro. Not only does it attract more foreign investment, it can also encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, the euro is likely to fall if economic data is weak. Economic data for the four largest economies in the eurozone (Germany, France, Italy and Spain) are particularly important, as they account for 75% of the eurozone economy.

Another important data release for the euro is the trade balance. This indicator measures the difference between what a country earns on its exports and what it spends on imports over a given period. If a country produces highly sought-after export products, its currency will appreciate purely because of the extra demand created by foreign buyers wanting to buy these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.

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