- EUR/USD begins the week on a softer note as the USD sees a slight uptick.
- The lack of ongoing selling pressure is something for bearish traders to consider.
- Investors seem hesitant ahead of the significant FOMC meeting on Wednesday.
The EUR/USD pairs are showing mild negative pressures after the mid-1500s. There’s a lack of bearish sentiment despite a modest rise in the USD during Monday’s Asian session. Prices are hovering near their highest since October 2021, with the 1.1630 level reached last week before traders look towards the upcoming FOMC decision.
As major central bank decisions approach, speculation about a potential rate cut from the Federal Reserve in September might be keeping USD bulls from making bold moves. Additionally, the European Central Bank (ECB) seems to be signaling an end to its rate-cut cycle, which could provide some support for the Euro and the EUR/USD pair.
From a technical perspective, recent trends indicate a steady short-term uptrend, which is beneficial for bullish traders. The oscillators in the daily chart remain in positive territory, suggesting that the EUR/USD pair might face minimal hurdles ahead. Therefore, any pullbacks could be seen as buying opportunities.
The psychological level of 1.1500 could guard against immediate declines, followed closely by resistance at 1.1450-1.1445 and trend support around 1.1435-1.1430. A significant drop below this support could push the EUR/USD further down to the 1.1370-1.1365 zone.
On the upside, resistance could be found in the 1.1570 area, as well as at the round figure of 1.1600 and the 1.1630 level reached last Thursday. Surpassing the 1.1655-1.1660 range could present new opportunities for bullish traders, potentially aiming for the 1.1700 mark.
EUR/USD Daily Chart
Euro FAQ
The Euro is the currency used by 19 countries in the European Union known as the eurozone. It’s the second most traded currency in the world after the US dollar, making up about 31% of forex trading in 2022, with daily transactions averaging over $2.2 trillion. The EUR/USD is the most traded currency pair globally, followed by EUR/JPY, EUR/GBP, and EUR/AUD.
The European Central Bank (ECB) is based in Frankfurt, Germany, and governs the eurozone’s monetary policy, primarily focused on maintaining price stability through interest rate management. The ECB meets eight times a year to make decisions on monetary policy, with the council composed of six permanent members, including the president, Christine Lagarde.
Inflation data in the eurozone is captured through the harmonized index of consumer prices (HICP), crucial for the euro’s valuation. If inflation surpasses anticipated levels, the ECB may need to raise interest rates to maintain control, especially if it goes beyond the 2% target. A higher interest rate tends to favor the euro as it makes the region attractive for investments.
Economic indicators play a critical role in influencing the euro. Data such as GDP, Manufacturing and Services PMIs, Employment figures, and Consumer Sentiment Surveys can impact currency direction. A robust economy generally supports the euro and could prompt the ECB to raise rates, while weaker data might lead to a decline in euro value. The four largest economies in the eurozone—Germany, France, Italy, and Spain—are particularly significant, representing about 75% of the economy.
Another key indicator for the euro is trade balances, which measure the difference between exports and imports. When a country has popular exports, it creates additional demand that can enhance the currency’s value. A positive trade balance typically boosts currency strength, while a negative balance can weaken it.
