- In the early European session on Monday, EUR/USD is trending higher near the 1.0885 level.
- The pair is maintaining bullish sentiment by climbing above the 100-period EMA but the RSI indicator remains in the bearish territory.
- The first downside target is 1.0865, with the immediate resistance level at 1.0900.
In the early hours of the European session on Monday, the EUR/USD pair was trading modestly higher around the 1.0885 level. The European Central Bank (ECB) kept interest rates unchanged in July, maintaining its data-dependent approach. ECB President Christine Lagarde reiterated that the central bank will maintain a tight policy stance for as long as necessary to achieve its 2% inflation target.
According to the 4-hourly chart, the EUR/USD pair is maintaining a positive tone as it has risen above the crucial 100-period Exponential Moving Average (EMA). However, the Relative Strength Index (RSI) is in the bearish territory around 43.0, indicating that a further drop cannot be ruled out.
The first support level for the major currency pair emerges at the lower limit of the Bollinger band near 1.0865. Further south, the next contentious level is the 100-period EMA at 1.0850. Follow-through selling below this level would see a drop to the psychological level of 1.0800.
On the upside, a decisive breakout above the round figure of 1.0900 will pave the way to the upper Bollinger band at 1.0950. If the upside continues, the March 8 high of 1.0981 will come into play. The key resistance level to watch out for is the 1.1000 level.
EUR/USD 4-hour chart
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, Accounted for With 31% of all foreign exchange trading and an average daily volume of over $2.2 trillion, EUR/USD is the most traded currency pair in the world. accounting All trades are off around 30% 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 are usually in favor of the euro, as it makes 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.
