- EUR/USD clings to small daily gains near 1.1400 in the European session on Wednesday.
- The Euro could struggle to gather bullish momentum after Tuesday’s soft inflation data.
- The US economic calendar will feature ADP Employment Change and ISM Services PMI data.
EUR/USD holds its ground and trades at around 1.1400 in the European morning on Wednesday after closing in negative territory on Tuesday. Ahead of the European Central Bank’s (ECB) monetary policy announcements on Thursday, the Euro could have a difficult time attracting buyers.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.47% | -0.56% | 0.03% | -0.22% | -0.61% | -0.84% | -0.15% | |
| EUR | 0.47% | -0.10% | 0.49% | 0.24% | -0.13% | -0.40% | 0.32% | |
| GBP | 0.56% | 0.10% | 0.62% | 0.34% | -0.03% | -0.30% | 0.42% | |
| JPY | -0.03% | -0.49% | -0.62% | -0.24% | -0.64% | -0.88% | -0.27% | |
| CAD | 0.22% | -0.24% | -0.34% | 0.24% | -0.39% | -0.64% | 0.07% | |
| AUD | 0.61% | 0.13% | 0.03% | 0.64% | 0.39% | -0.21% | 0.50% | |
| NZD | 0.84% | 0.40% | 0.30% | 0.88% | 0.64% | 0.21% | 0.72% | |
| CHF | 0.15% | -0.32% | -0.42% | 0.27% | -0.07% | -0.50% | -0.72% |
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 improving sentiment surrounding the US economic outlook, on the back of better than expected job openings data for April, helped the US Dollar (USD) stay resilient against its rivals and weighed on EUR/USD on Tuesday.
Meanwhile, the Euro came under pressure after the data published by Eurostat showed that annual inflation in the Eurozone, as measured by the change in the Harmonized Index of Consumer Prices (HICP), softened to 1.9% in May from 2.2% in April. Investors could be shifting their expectations toward a dovish ECB outlook following this data.
Later in the day, the ADP Employment Change and the ISM Services PMI data for May will be featured in the US economic calendar.
Employment in the US private sector is forecast to rise by 115,000 following the dismal 62,000 increase recorded in May. A stronger-than-expected print could support the USD with the immediate reaction and cause EUR/USD to stretch lower. On the other hand, a weak print either in the employment data or the headline ISM Services PMI reading could hurt the USD. Nevertheless, EUR/USD’s upside could remain capped, with investors refraining from positioning themselves for a steady increase in the pair heading into the ECB event.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds slightly above 50 and EUR/USD continues to trade comfortably above the 200-period Simple Moving Average (SMA). Although the technical outlook in the near term remains slightly bullish, it points to a lack of momentum.
On the upside, 1.1450 (static level) aligns as the first immediate resistance level before 1.1500 (static level, round level) and 1.1575 (April 21 high). Looking south, supports could be seen at 1.1380 (Fibonacci 23.6% retracement of the latest uptrend), 1.1320 (200-period Simple Moving Average) and 1.1300 (100-period SMA).
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.
