EUR/USD Forecast: Euro stays resilient following inflation data
- EUR/USD recovered above 1.0700 following the EU data.
- The near-term technical outlook suggests that sellers remain hesitant.
- Employment Cost Index data from the US will be watched closely later in the day.
EUR/USD closed in positive territory on Monday but lost its traction in the early trading hours of the European session. After falling below 1.0700, however, the pair staged a rebound, supported by the latest data releases from the Euro area.
Euro price today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.09% | 0.11% | 0.13% | 0.47% | 0.39% | 0.44% | -0.02% | |
| EUR | 0.09% | 0.21% | 0.23% | 0.58% | 0.54% | 0.56% | 0.09% | |
| GBP | -0.12% | -0.22% | 0.02% | 0.35% | 0.29% | 0.34% | -0.14% | |
| CAD | -0.12% | -0.21% | -0.02% | 0.34% | 0.26% | 0.32% | -0.15% | |
| AUD | -0.47% | -0.55% | -0.36% | -0.34% | -0.08% | -0.03% | -0.46% | |
| JPY | -0.39% | -0.50% | -0.29% | -0.27% | 0.08% | 0.04% | -0.44% | |
| NZD | -0.43% | -0.56% | -0.34% | -0.32% | 0.03% | -0.06% | -0.47% | |
| CHF | 0.05% | -0.09% | 0.13% | 0.14% | 0.49% | 0.45% | 0.46% |
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 data from Germany showed that the real Gross Domestic Product (GDP) contracted at an annual rate of 0.2% in the first quarter, matching the market expectation.
Meanwhile, Eurostat reported that the core Harmonized Index of Consumer Prices (HICP) rose 2.7% on a yearly basis in April. This reading followed the 2.9% increase recorded in March but came in above the market expectation of 2.6%. On a monthly basis, Core HICP rose 0.7%. Additionally, Eurozone GDP grew 0.4% (YoY) in the first quarter, surpassing analysts’ estimate of 0.2%.
These data suggest that the European Central Bank (ECB) could opt to wait and assess more data after lowering the policy rate in June. In turn, the Euro stays resilient against its rivals during the European trading hours.
Later in the day, first-quarter Employment Cost Index data from the US will be watched closely by market participants. A bigger-than-forecast increase could help the US Dollar find demand in the second half of the day. Nevertheless, investors are likely to wait until the Federal Reserve announces its monetary policy decisions on Wednesday before taking large positions.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart climbed to 60 after testing 50 earlier in the day, highlighting the lack of sellers’ hesitancy. On the upside, 1.0750 (Fibonacci 38.2% retracement of the latest downtrend) aligns as first resistance before 1.0770 (200-period Simple Moving Average) and 1.0800 (psychological level).
First support is located at 1.0700 (Fibonacci 23.6% retracement) ahead of 1.0650 (static level) and 1.0600 (end-point of the downtrend).
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.