EUR/USD Forecast: Euro needs to clear 1.0660 to extend recovery
- EUR/USD fluctuates in a tight range above 1.0600 on Wednesday.
- Euro could stretch higher in case it clears 1.0660.
- Markets will pay close attention to comments from central bankers.
EUR/USD holds steady above 1.0600 early Wednesday after posting small losses on Tuesday. The near-term technical outlook suggests that the pair could extend its recovery in case it manages to clear 1.0660.
EUR/USD edged higher in the early American session on Tuesday after the disappointing housing data from the US weighed on the US Dollar (USD). Later in the day, however, hawkish comments from Federal Reserve (Fed) Chairman Jerome Powell helped US Treasury bond yields gain traction and supported the USD. Powell noted that the performance of the US economy has been “quite strong” and added that the recent data indicate a lack of significant progress on inflation this year.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.18% | 0.06% | 0.38% | 0.87% | 0.83% | 0.59% | -0.40% | |
| EUR | -0.15% | -0.09% | 0.23% | 0.71% | 0.68% | 0.45% | -0.55% | |
| GBP | -0.08% | 0.09% | 0.31% | 0.79% | 0.77% | 0.53% | -0.48% | |
| CAD | -0.38% | -0.21% | -0.32% | 0.48% | 0.46% | 0.22% | -0.78% | |
| AUD | -0.86% | -0.71% | -0.81% | -0.48% | -0.03% | -0.26% | -1.24% | |
| JPY | -0.82% | -0.65% | -0.75% | -0.45% | 0.04% | -0.22% | -1.24% | |
| NZD | -0.60% | -0.45% | -0.56% | -0.22% | 0.28% | 0.24% | -1.00% | |
| CHF | 0.39% | 0.54% | 0.45% | 0.77% | 1.26% | 1.20% | 0.98% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The US economic docket will not offer any high-tier data releases on Wednesday. Several European Central Bank (ECB) policymakers, including President Christine Lagarde, and Fed officials are scheduled to speak later in the day.
In an interview with CNBC on Tuesday, ECB President Lagarde said that the ECB will cut rates soon, barring any major surprises. Markets are fairly certain that the ECB will lower key rates by 25 basis points in June. ECB policymakers are unlikely to provide any clues regarding the policy outlook after June.
Market participants will continue to pay close attention to geopolitical headlines as well. Israel said on Tuesday that it will retaliate against Iran. A war cabinet meeting is expected to take place on Wednesday to decide on the appropriate response. A further escalation of the conflict could force investors to seek refuge and allow the USD to benefit from safe-haven demand.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rose above 30, suggesting that EUR/USD has corrected oversold conditions. On the upside, 1.0660 (static level) aligns as immediate resistance. In case the pair rises above this level and starts using it as support, it could extend its recovery toward 1.0700 (psychological level, static level) and 1.0730 (static level).
Supports are located at 1.0600 (static level), 1.0550 (static level from October) and 1.0500 (psychological level, static level).
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.