EUR/USD continues to trade above 1.1000 after hitting a new 2024 high on Wednesday. The US economic calendar is set to release some important data on Thursday. The technical outlook for the currency pair suggests that the bullish trend is sustained.
EUR/USD has picked up bullish momentum and hit a 2024 high near the 1.1050 level on Wednesday. The pair is in a consolidation phase and is trading just above the 1.1000 level in Thursday’s European session.
US Dollar Price This Week
The table below shows the percentage change of the US Dollar (USD) against major listed currencies this week. The US Dollar was strongest against the Japanese Yen.
USD EUR GBP JPY CAD AUD NZD CHF USD -0.80% -0.64% 0.49% -0.20% -0.63% 0.06% 0.14% EUR 0.80% 0.18% 1.28% 0.60% 0.06% 0.85% 0.96% GBP 0.64% -0.18% 1.34% 0.42% -0.13% 0.67% 0.78% JPY -0.49% -1.28% -1.34% -0.67% -1.17% -0.43% -0.36% CAD 0.20% -0.60% -0.42% 0.67% -0.47% 0.26% 0.37% AUD 0.63% -0.06% 0.13% 1.17% 0.47% 0.80% 0.92% New Zealand Dollar -0.06% -0.85% -0.67% 0.43% -0.26% -0.80% 0.10% Swiss Franc -0.14% -0.96% -0.78% 0.36% -0.37% -0.92% -0.10%
The heat map displays the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select USD from the left column and move it along the horizontal line to Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
US data released on Wednesday showed that the Consumer Price Index (CPI) and Core CPI both rose 0.2% month-on-month in July, in line with expectations. The US inflation data improved risk mood, weakening demand for the US Dollar (USD).
In European markets, US stock index futures traded slightly higher in the morning. On the US economic calendar, weekly jobless claims data and July retail sales data are released on Thursday.
The US Dollar (USD) may have an immediate boost as initial unemployment claims fell sharply to below 220,000. Meanwhile, retail sales are forecast to rise 0.3% after remaining flat in June. Even if jobless claims come in higher than expected, a negative reading could reignite fears of a US recession, hurting the USD.
Investors will also be keeping an eye on comments from Federal Reserve officials. If policymakers indicate that a 50 basis points (bps) rate cut in September is unlikely following July’s inflation reading, the US dollar is likely to remain firm against other currencies.
EUR/USD Technical Analysis
The relative strength index (RSI) indicator on the four-hour chart has fallen below 70 after hitting 80 on Wednesday, suggesting that the bullish bias for the currency pair remains in place even after the technical correction.
On the downside, 1.1000 (psychological, static level) is aligned as immediate support before 1.0960 (static level), 1.0940 (static level) and 1.0900 (psychological, static level). If the pair manages to sustain above 1.1000, the buyers may try to maintain their lead. In this scenario, 1.1050-1.1060 (static levels) may be seen as the next resistance before 1.1100 (psychological, static level).
Frequently asked questions about the Euro
The Euro is the currency of 20 European Union countries that belong to the Eurozone. It is the second most traded currency in the world after the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily volume of over $2.2 trillion. EUR/USD is the most traded currency pair in the world, accounting for approximately 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB), located in Frankfurt, Germany, is the reserve bank for the eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s main mission is to maintain price stability, which means either keeping inflation down or stimulating growth. The ECB’s main tool is to raise or lower interest rates. Relatively higher interest rates, or the expectation of rising interest rates, typically benefit the euro and vice versa. The ECB Governing Council decides monetary policy at its eight meetings per year. Decisions are made by the heads of the eurozone national banks and the six permanent members, including ECB President Christine Lagarde.
Eurozone inflation data, as measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric input for the euro. If inflation rises more than expected, especially if it exceeds the ECB’s target of 2%, the ECB will be forced to raise interest rates to keep inflation in check. Relatively high interest rates compared to other countries usually benefit the euro, as they make the eurozone a more attractive place for global investors to park their funds.
Data released measures the health of the economy and can affect 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, it can also trigger the ECB to raise interest rates, which directly strengthens the euro. On the other hand, weak economic data can cause the euro to weaken. Economic data from the eurozone’s four largest economies (Germany, France, Italy, and Spain) is particularly important as they account for 75% of the eurozone’s economy.
Another important piece of data about the euro is the trade balance. This indicator measures the difference between what a country earns from exports and what it spends on imports over a given period of time. If a country produces exports that are in high demand, its currency will only increase in value due to the additional demand it generates from foreign buyers looking to purchase these goods. So a positive trade balance makes a currency stronger, and a negative one makes it stronger.