close
close

Euro remains bullishly biased as new week begins

Posted on by Vaseline
Euro remains bullishly biased as new week begins

  • EUR/USD trades above 1.1100 during the European session on Monday.
  • The technical outlook suggests that the bullish stance remains intact.
  • The Federal Reserve (Fed) will announce its monetary policy decisions on Wednesday.

EUR/USD holds its ground in the European session on Monday, trading above 1.1100, supported by broad-based weakness in the US dollar (USD). The technical outlook highlights a build-up of bullish momentum.

Euro PRICE Last 7 days

The table below shows the percentage change of the Euro (EUR) against major quoted currencies over the past 7 days. The Euro was strongest against the Canadian Dollar.

US dollar EUR GBP Japanese yen CAD AUD New Zealand CHF
US dollar -0.26% -0.29% -1.75% 0.11% -0.85% -0.10% 0.05%
EUR 0.26% -0.09% -1.41% 0.37% -0.64% 0.17% 0.29%
GBP 0.29% 0.09% -1.46% 0.46% -0.55% 0.24% 0.37%
Japanese yen 1.75% 1.41% 1.46% 1.87% 0.91% 1.63% 2.01%
CAD -0.11% -0.37% -0.46% -1.87% -0.92% -0.23% 0.10%
AUD 0.85% 0.64% 0.55% -0.91% 0.92% 0.79% 0.90%
New Zealand 0.10% -0.17% -0.24% -1.63% 0.23% -0.79% 0.15%
CHF -0.05% -0.29% -0.37% -2.01% -0.10% -0.90% -0.15%

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 (USD) came under selling pressure in the second half of last week as investors reassessed the likelihood of a 50 basis point (bps) rate cut by the Federal Reserve (Fed) at its upcoming policy meeting.

Softer-than-expected inflation data from manufacturers and a piece by The Wall Street Journal reporter Nick Timiraos, widely seen as a “Fed insider,” arguing that the size of the Fed’s rate cut at next week’s meeting will be a dicey proposition have revived expectations for aggressive policy easing. According to the CME FedWatch Tool, markets are currently pricing in a nearly 60% chance of a major rate cut this Wednesday.

The economic calendar will not offer any high-tier data releases on Monday, so investors may want to hold off on taking large positions.

On Tuesday, the ZEW business sentiment survey for the Eurozone and Germany will be included in the European economic dossier. Later in the day, the US Census Bureau will publish the Retail Sales data for August.

Technical analysis EUR/USD

EUR/USD broke through the descending trendline from late August and the pair closed the latest 4-hour candle above the 100-period Simple Moving Average (SMA). Moreover, the Relative Strength Index (RSI) indicator remains comfortably above 60, reflecting the bullish bias.

On the upside, 1.1160 (static level) forms the first resistance before 1.1200 (static level) and 1.1275 (high on Jul 18, 2023).

Should EUR/USD settle below 1.1100 (Fibonacci 23.6% retracement of the last uptrend, 100-period SMA) and use this level as resistance, technical sellers could take action. In this scenario, 1.1040-1.1030 (Fibonacci 38.2% retracement, 200-period SMA) could be seen as the next support.

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.

Related Posts