- EUR/USD returned to the 1.0400 area following Monday's choppy action.
- The pair is likely to have a difficult time finding direction in the near term.
- Next macroeconomic data releases that could drive the pair's action will be released on Thursday.
EUR/USD climbed above 1.0450 and touched its highest level in over 10 days on Monday but failed to preserve its bullish momentum. As trading conditions remain thin on New Year's Eve, the pair moves sideways at around 1.0400.
Euro PRICE This month
The table below shows the percentage change of Euro (EUR) against listed major currencies this month. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.38% | 0.99% | 3.09% | 2.50% | 4.45% | 4.57% | 2.31% | |
| EUR | -1.38% | -0.39% | 1.67% | 1.10% | 3.03% | 3.14% | 0.92% | |
| GBP | -0.99% | 0.39% | 2.04% | 1.49% | 3.43% | 3.55% | 1.29% | |
| JPY | -3.09% | -1.67% | -2.04% | -0.57% | 1.31% | 1.42% | -0.79% | |
| CAD | -2.50% | -1.10% | -1.49% | 0.57% | 1.90% | 2.03% | -0.19% | |
| AUD | -4.45% | -3.03% | -3.43% | -1.31% | -1.90% | 0.11% | -2.07% | |
| NZD | -4.57% | -3.14% | -3.55% | -1.42% | -2.03% | -0.11% | -2.18% | |
| CHF | -2.31% | -0.92% | -1.29% | 0.79% | 0.19% | 2.07% | 2.18% |
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 negative shift in risk mood, as reflected by the bearish action seen in Wall Street, helped the US Dollar (USD) stay resilient against its rivals in the second half of the day on Monday. Meanwhile, the data from the US showed that Pending Home Sales rose by 2.% on a monthly basis in November, following the 1.8% increase recorded in October and surpassing the market expectation of 0.7%.
The economic calendar will not offer any data releases on Tuesday and financial markets will remain closed on the New Year's Day on Wednesday.
On Thursday, weekly Initial Jobless Claims and Challenger Job Cuts data for December from the US will be looked upon for fresh impetus.
EUR/USD Technical Analysis
After dipping to 40 on Monday, the Relative Strength Index (RSI) indicator on the 4-hour chart recovered to 50, highlighting sellers' hesitancy.
On the upside, 1.0440 (static level) aligns as first resistance for EUR/USD before 1.0460 (100-period SMA) and 1.0490-1.0500 (200-period SMA, round level). In case the pair drops below 1.0400 (round level, static level) and starts using this level as resistance, 1.0350 (static level) and 1.0300 (static level, round level) could be seen as next support levels.
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.
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