The Euro (EUR) is maintaining its gains from the previous day, trading around 1.1630 against the US Dollar (USD) during the Asian session on Friday. This major pair saw a notable increase on Thursday as the US Dollar faced substantial selling pressure following remarks from Federal Reserve Governor Christopher Waller that were perceived as dovish.
At the moment, the US Dollar Index (DXY), which measures the value of the Greenback against six significant currencies, is hovering near Thursday’s low of approximately 99.00.
During a Reuters NEXT Newsmaker event on Thursday, Waller mentioned that he would support keeping the policy rate steady in the upcoming September meeting if the August inflation data indicates progress toward the 2% target.
Although he didn’t entirely dismiss the chance of increasing interest rates this month if inflation figures are unexpectedly high, his comments about “finally seeing some signs of disinflation in recent data” suggest a tendency toward maintaining the current policy.
Meanwhile, investors are on the lookout for the crucial United States (US) Nonfarm Payrolls (NFP) data for August, set to be released at 12:30 GMT.
EUR/USD Technical Analysis
Looking at the daily chart, EUR/USD is trading at 1.1630, staying above the 100-day simple moving average (SMA) of 1.1564. This maintains a slightly bullish outlook for the near term, as the recent gains are supported by this trend indicator.
The Relative Strength Index (RSI) is around 57, indicating positive momentum without being overstretched. This suggests that buyers still hold the advantage without venturing into overbought territory.
On the downside, initial support is identified at the 100-day SMA around 1.1564, with a potential break here possibly leading to further declines toward earlier daily lows. In contrast, upwards movement could see the major currency pair reaching for the August high of 1.1720.
Euro FAQs
The Euro is the currency used by the 20 European Union countries that are part of the Eurozone. It ranks as the second most traded currency globally, just behind the US Dollar. In 2022, it represented 31% of all foreign exchange transactions, with an average daily turnover exceeding $2.2 trillion.
The European Central Bank (ECB) in Frankfurt serves as the reserve bank for the Eurozone, overseeing interest rates and managing monetary policy. Its main objective is to ensure price stability, either by controlling inflation or promoting growth. Adjusting interest rates is the primary tool for achieving this. Higher interest rates—or the anticipation of them—tend to benefit the Euro.
Inflation data for the Eurozone, as measured by the Harmonized Index of Consumer Prices (HICP), is vital for the Euro’s valuation. If inflation exceeds expectations, particularly if it surpasses the ECB’s 2% target, it necessitates interest rate hikes from the ECB to rein it in. Consequently, relatively high interest rates compared to other currencies typically strengthen the Euro.
Economic indicators such as GDP, Manufacturing and Services PMIs, employment figures, and consumer sentiment surveys can all impact the Euro’s direction. A robust economy tends to attract foreign investment and may lead the ECB to increase interest rates, thus bolstering the Euro. Conversely, weak economic data may cause the Euro to decline.
The Trade Balance is another crucial indicator for the Euro, reflecting the difference between a country’s export earnings and its spending on imports over a set period. A country with strongly desired exports is likely to see its currency appreciate due to the extra demand from foreign buyers. Therefore, a positive net Trade Balance tends to strengthen a currency, while a negative balance has the opposite effect.
