- EUR/USD strengthens near 1.1055 in Monday’s early European session.
- The pair maintains the positive view above the key 100-day EMA, but RSI indicator shows the neutral momentum.
- The first upside barrier emerges at 1.1185; the crucial support level is seen at 1.1000.
The EUR/USD pair trades with mild gains around 1.1055, snapping the three-day losing streak during the early European session on Monday. The dovish stance of the US Federal Reserve (Fed) undermines the Greenback and provides some support to EUR/USD.
Financial markets are now pricing in a nearly 70% odds of a 25 basis points (bps) rate cut by the Fed in September, while the chance of a 50 bps reduction stands at 30%, according to the CME FedWatch tool. The attention will shift to the US employment data on Friday for further insights about the potential rate cuts in September.
Technically, the bullish outlook of EUR/USD remains intact as the major pair holds above the key 100-day Exponential Moving Averages (EMA) on the daily timeframe. Nonetheless, further consolidation cannot be ruled out as the 14-day Relative Strength Index (RSI) hovers around the midline, suggesting the neutral momentum of the trend.
The immediate resistance level for the major pair emerges at 1.1185, the high of August 28. Further north, the next hurdle is seen at the upper boundary of the Bollinger Band at 1.1230. A decisive break above this level will see a rally to 1.1275, the high of July 18.
In the bearish event, the potential downside support level is located at the 1.1000 psychological mark. A breach of this level will see a drop to 1.0950, the low of August 15. The additional downside filter to watch is near the 100-day EMA at 1.0893, followed by the lower limit of the Bollinger Band at 1.0863.
EUR/USD daily chart
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.
Source: https://www.fxstreet.com/news/eur-usd-price-analysis-holds-above-11150-the-constructive-outlook-remains-intact-202409020602