Created
: 2024.10.07
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EUR/USD Price Forecast: Path of least resistance appears to the downside
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EUR/USD Price Forecast: Path of least resistance appears to the downside
New
2024.10.07 15:51
2024.10.07 15:51
2024.10.07 15:51
- EUR/USD weakens to near 1.0965 in Monday's early European session.
- The bullish outlook of the pair looks fragile on the daily chart, with the RSI indicator holding below the midline.
- The initial support level is seen at 1.0881; the immediate resistance level is located at 1.1000.
The EUR/USD pair trades in negative territory for the seventh consecutive day around 1.0965 during the early European session on Monday. The major pair remains under selling pressure amid the further upside in the US Dollar (USD). The recent US jobs data released on Friday has prompted traders to pull back expectations for 50 basis points (bps) Fed rate cut at the November meeting.
According to the daily chart, the bullish outlook of EUR/USD looks vulnerable as the major pair hovers around the key 100-day Exponential Moving Averages (EMA). EUR/USD could resume its downside bias if it decisively crosses below the 100-day EMA. Additionally, the downward momentum is supported by the Relative Strength Index (RSI), which stands below the midline near 37.55, suggesting that the path of least resistance is to the downside.
Decisive trading below the 100-day EMA at 1.0970 could see a drop to 1.0881, the low of August 8. The crucial support level for the cross emerges in the 1.0805-1.0800 zone, the low of July 9 and the round mark.
On the upside, the 1.1000 psychological level will be the first upside barrier for the pair. Extended gains could see a rally to 1.1144, the high of October 1. A break above this level could pave the way to 1.1223, the upper boundary of the Bollinger Band.
EUR/USD daily chart
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.
Last updated
: 2024.10.07
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