- The EUR/USD is having a tough time taking advantage of a small bullish gap stemming from the US-EU trade agreement.
- The technical indicators suggest there might be opportunities for buying dips as the USD weakens.
- Nevertheless, traders are likely to hold off until after the two-day FOMC meeting results.
The EUR/USD pair is kicking off the week around the 1.1770 mark during the Asian trading sessions, reacting positively to the news of a trade deal between the US and the European Union (EU). Still, the Spot Price is struggling to gain momentum ahead of the crucial two-day FOMC meeting starting Tuesday. Many traders seem to prefer standing by for now while awaiting significant economic announcements from the US.
From a technical perspective, the EUR/USD pair is showing strength above the 100-period Simple Moving Average (SMA) on the 4-hour chart. Moreover, favorable oscillators on the daily and hourly charts bolster the case for potential upward movements. Yet, it might be best to wait for the pair to move decisively above the daily swing highs in the 1.1770 area before committing to a bullish position.
Should the EUR/USD pair break past the 1.1800 mark, it could build on its positive momentum, perhaps reaching the 1.1830 level, which would be the highest since September 2021. Sustained movement beyond this level may signal a continuation of the long-term upward trend that began at the start of the year around 1.0180-1.0175 from January.
On the flip side, the four-hour 100 SMA near 1.1700 might act as a protective barrier against immediate downturns. Also, any declines may present a buying opportunity near the support zone around 1.1640. If the price breaks below that level, it might set the stage for a re-test of the monthly lows around 1.1560-1.1555.
Continued selling could lead to a test of the psychological level of 1.1500, possibly extending further down toward the 1.1455-1.1450 range and the 1.1400 mark.
EUR/USD 4-hour chart
Euro FAQ
The euro serves as the currency for 19 countries within the eurozone and is the second most traded currency worldwide, following the US dollar. In 2022, it represented 31% of all forex trading, racking up an impressive daily turnover of over $2.2 trillion. The EUR/USD pair tops the list of the most traded currency pairs globally, with other pairs like EUR/JPY and EUR/GBP holding significantly smaller shares.
The European Central Bank (ECB), based in Frankfurt, oversees the eurozone’s monetary policies, aiming for price stability and managing interest rates. A high interest rate usually bolsters the euro’s value, making the region a more appealing investment environment. Key policy decisions are made during eight annual ECB meetings, involving a select group of permanent members.
Inflation data for the eurozone is captured using a harmonized index of consumer prices (HICP), which is crucial for the euro. An unexpected rise in inflation can prompt the ECB to raise interest rates to maintain its 2% inflation target. Higher interest rates relative to other currencies typically strengthen the euro, attracting investments into the region.
Key economic indicators like GDP, Manufacturing and Services PMIs, employment figures, and consumer sentiment surveys can significantly affect the euro’s trajectory. Strong performance in these areas could attract foreign investments and encourage the ECB to raise interest rates, thereby strengthening the euro. Conversely, weak data could lead to a decline.
Trade balances also provide critical insights for the euro, measuring the difference between a country’s exports and imports over a given period. A favorable trade balance usually strengthens the currency by increasing demand from foreign buyers for local goods.
