During the early hours of Wednesday’s European trading session, EUR/USD is slightly down, hovering around 1.1565. The US dollar has gained a bit against the euro, likely driven by optimism that the US government shutdown may soon come to an end. Later on Monday, the Eurozone is set to release its Centix Investor Confidence Report for November.
According to a report from Reuters on Monday, the U.S. Senate has advanced a bill aimed at resolving the government shutdown. This bill is closer to securing initial approval with a vote of 60-40, which includes extending Affordable Care Act subsidies. However, the proposed amendment still requires approval from the House of Representatives before it can reach President Trump’s desk, a process that could take several days.
From a technical perspective, the outlook for EUR/USD remains negative, given that the major currency pair is trading below the crucial 100-day exponential moving average (EMA) on the daily chart. Furthermore, the 14-day Relative Strength Index (RSI) sits under the midpoint at around 44.95, hinting that further declines might be likely in the short term.
If the pair manages to break decisively above the 100-day EMA at 1.1575, it could generate renewed bullish momentum towards the October 28 peak of 1.1668. However, there’s also a significant barrier in the 1.1700-1.1705 range, which marks a psychological level and the upper edge of the Bollinger Bands.
On the downside, the initial support level for EUR/USD is found at the November 5 low of 1.1468. If bearish momentum continues, prices might drop to the July 31 low of 1.1403, with an additional noteworthy support level at the June 3 low of 1.1364.
EUR/USD daily chart
Euro Frequently Asked Questions
The euro serves as the currency for 20 countries in the European Union that form the euro area. It’s the second most traded currency globally, following the US dollar. In 2022, it accounted for 31% of all forex trades, with daily volumes averaging over $2.2 trillion. The EUR/USD pair is the most commonly traded currency pair, making up about 30% of all transactions, with EUR/JPY, EUR/GBP, and EUR/AUD trailing behind.
Located in Frankfurt, the European Central Bank (ECB) serves as the reserve bank for the euro area. It determines interest rates and conducts monetary policy with the primary goal of maintaining price stability. This often involves raising or lowering interest rates. If interest rates are high or are expected to rise, it generally supports the euro’s value. Monetary policy decisions are made during the ECB’s eight annual meetings, led by the heads of national banks and the six permanent members, including ECB president Christine Lagarde.
Inflation data from the Eurozone, tracked by the Harmonized Index of Consumer Prices (HICP), is a critical indicator for the euro. If inflation rises unexpectedly, particularly beyond the ECB’s 2% target, it typically results in rate hikes to curb inflation. Higher interest rates compared to other countries tend to make the euro more attractive, drawing in global investment.
The release of economic data can provide insight into the economy’s health and potentially influence the euro’s direction. Metrics like GDP, manufacturing and services PMIs, employment figures, and consumer sentiment surveys all play a role. A robust economy bodes well for the euro, likely attracting more foreign investment and possibly prompting the ECB to increase rates, which strengthens the currency. Conversely, weak data could lead to a depreciation of the euro. Data from the four largest euro area economies—Germany, France, Italy, and Spain—holds particular significance, as they make up 75% of the region’s economy.
Another key piece of information regarding the euro is the trade balance, reflecting the difference between export earnings and import expenditures over a specific time. When a country has desirable export products, the demand from foreign buyers can strengthen its currency. Thus, a positive trade balance generally supports currency value, while a negative one tends to weaken it.
