- EUR/USD continues to decline as the euro depreciates.
- Textile prices hit a 57-week low as the US dollar continued to rise.
- Friday's U.S. retail sales conclude the economic calendar.
EUR/USD briefly tested a year-to-date low on Thursday, breaking above the 1.0500 handle for the first time in 54 weeks. The lack of meaningful data from the EU has done little to support the euro, with fiber bidding continuing to tilt in favor of the safe-haven US dollar. Europe's gross domestic product (GDP) growth failed to trigger a bid under the euro and was exactly as expected. The total EU GDP for the quarter was 0.4% compared to the previous quarter, as expected by the market, and the annualized GDP was also 0.9% compared to the previous year, which was in line with expectations.
Producer-level inflation in the Producer Price Index (PPI) was broadly in line with expectations, despite a slight increase in annualized core PPI numbers. The headline PPI was in line with October's forecast, rising 0.2% month-over-month compared to the previous month's revised 0.1%. Core PPI for the year ended October accelerated more than expected, rising to 3.1% compared to the expected 3.0%, higher than 2.9% in the previous quarter, and also slightly revised upwards from 2.8%.
The economic calendar took another one-sided turn on Friday, with US retail sales ending the trading week on a strong note. The final U.S. economic data this week will be October retail sales, which are expected to fall to 0.3% from 0.4% the previous month.
EUR/USD price prediction
The daily chart of EUR/USD shows sustained bearish momentum, staying well below the 50-day and 200-day exponential moving averages (EMAs), which are located around 1.0867 and 1.0884, respectively. The recent 'death cross' where the 50-day EMA dropped below the 200-day EMA strengthens downside pressure and signals a continuation of the prevailing downtrend. EUR/USD is currently trading near multi-month lows around the 1.0520 level, which could provide psychological support in the short term. However, any recovery is likely to face strong resistance near the 1.0700 level, where the EMA converges.
The MACD indicator further confirms the bearish outlook, as the MACD line remains in negative territory below the signal line and the histogram bar expands below the zero line. This configuration shows sustained selling momentum and a solid downtrend. Unless the pair can produce a clear breakout above the EMA, the bias will remain firmly to the downside. A break below the 1.0500 level could open the door for further decline, with 1.0400 emerging as the next potential support area. The bulls will need a decisive recovery above the 1.0880 mark to offset the bearish bias.
EUR/USD daily chart
Euro Frequently Asked Questions
The euro is the currency of the 19 European Union countries that belong to the euro area. It is the second most traded currency in the world after the US dollar. In 2022, Accounted for It accounts for 31% of all foreign exchange transactions and has an average daily trading volume of over $2.2 trillion. EUR/USD is the most frequently traded currency pair in the world. accounting An estimated 30% discount on 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 of the euro area. The ECB sets interest rates and controls monetary policy. The ECB's main task is to maintain price stability, which means controlling inflation or stimulating growth. The main means of doing so is raising or lowering interest rates. Relatively high interest rates, or expectations of rising interest rates, usually benefit the euro and vice versa. The ECB Governing Council decides monetary policy at its eight annual meetings. Decisions will be made by the heads of the euro zone national banks and the six permanent members of the ECB, including Christine Lagarde, president of the ECB.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric indicator for the euro. If inflation rises more than expected, especially above the ECB's 2% target, the ECB will mandate interest rate hikes to rein in inflation. Relatively high interest rates compared to other countries typically benefit the euro, as it makes the region more attractive to global investors as a place to park their funds.
The data release will gauge the health of the economy and could have an 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. This could not only attract more foreign investment but also prompt the ECB to raise interest rates, which could directly lead to a stronger euro. Otherwise, if economic indicators are weak, the euro is likely to weaken. Economic data for the euro area's four largest economies (Germany, France, Italy and Spain) is particularly important, as they account for 75% of the euro area economy.
Another important data regarding 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 highly sought-after export goods, the value of its currency increases purely due to the additional demand generated from foreign buyers seeking to purchase these goods. Therefore, if the net trade balance is positive, the currency strengthens, and vice versa if it is negative.
