The Euro (EUR) has continued its recovery from Thursday against the US Dollar (USD) as the trading wraps up on Friday. The EUR/USD pair rose by 0.2%, approaching 1.1235. This increase in the Euro comes after a significant correction in the yields on French bonds.
The yields on 10-year French bonds have dropped by about 3.4% or 17 basis points (bps), bringing them down to 4.8% from the highs seen on Thursday.
The Euro had struggled recently, primarily due to the growing gap between the yields on French bonds compared to other Eurozone countries. Financial analysts suggest that the fiscal risks associated with France remain a concern, indicating that this uptick in the Euro might be temporary.
Euro Price This week
The Euro has shown various percentage changes against other major currencies this week, with its performance weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.36% | 0.02% | 0.19% | -0.21% | -0.37% | 0.11% | 0.31% | |
| EUR | -0.36% | -0.34% | -0.09% | -0.55% | -0.73% | -0.26% | -0.02% | |
| GBP | -0.02% | 0.34% | 0.25% | -0.20% | -0.39% | 0.09% | 0.30% | |
| JPY | -0.19% | 0.09% | -0.25% | -0.39% | -0.47% | -0.04% | 0.14% | |
| CAD | 0.21% | 0.55% | 0.20% | 0.39% | -0.11% | 0.23% | 0.51% | |
| AUD | 0.37% | 0.73% | 0.39% | 0.47% | 0.11% | 0.49% | 0.69% | |
| NZD | -0.11% | 0.26% | -0.09% | 0.04% | -0.23% | -0.49% | 0.20% | |
| CHF | -0.31% | 0.02% | -0.30% | -0.14% | -0.51% | -0.69% | -0.20% |
The heat map illustrates the percentage changes of major currencies relative to one another. The base currency is selected from the left column, and the quote currency is from the top row. For instance, the percentage change from the Euro to the US Dollar represents the EUR/USD exchange rate.
Euro sentiment stays fragile as French risks linger
Analysts at ING express caution, suggesting that the Euro’s recent upswing may not last. They point out that ongoing political and fiscal issues in France continue to impact market sentiment. They’re not convinced that Marine Le Pen’s promised fiscal adjustments will be enough to shift the landscape for French bonds, and they believe that the Euro might feel the impact of uncertainty surrounding France for an extended period.
Additionally, a decline in the US Dollar due to a dip in US Treasury Yields has helped bolster the EUR/USD pair. At this point, the US Dollar Index (DXY), which measures the dollar’s performance against a basket of six major currencies, is slightly lower at around 102.00. The DXY has seen a decrease since Thursday, where it couldn’t maintain a rise above this year’s peak of 102.54.
Looking ahead, market participants are awaiting the release of the US Consumer Price Index (CPI) data for September, set to be published next Wednesday.
EUR/USD Technical Analysis
On the daily chart, EUR/USD is trading at 1.1221, indicating a clear bearish trend since the price remains below the 20-period exponential moving average (EMA) at 1.1344, which now acts as immediate resistance. The gap between the current price and the EMA suggests that the pair is in a short-term downtrend. Meanwhile, the Relative Strength Index (RSI), around 27, indicates oversold conditions that might slow down further aggressive selling, though it doesn’t necessarily imply a bullish turnaround.
For resistance levels, the initial barrier is at the 20-day EMA point of 1.1344. A daily close above this level would be essential to relieve some bearish pressure and could potentially set the stage for a corrective bounce. Conversely, without nearby support levels, the pair seems exposed to further drops, and traders will likely keep an eye on price movements and any higher lows that may emerge to establish a temporary bottom if selling resumes.
Euro FAQs
The Euro serves as the currency for the 20 countries in the Eurozone. It ranks as the second most traded currency globally after the US Dollar, making up 31% of all foreign exchange transactions as of 2022, with daily trading surpassing $2.2 trillion. The EUR/USD pairing is the most widely traded in the world, accounting for approximately 30% of transactions followed by EUR/JPY (4%), EUR/GBP (3%), and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt oversees the Eurozone’s monetary policy, including setting interest rates. Its main goal is to maintain price stability, balancing inflation control with growth stimulation. A significant tool for the ECB is adjusting interest rates, where higher rates typically favor the Euro.
Inflation data in the Eurozone, tracked through the Harmonized Index of Consumer Prices (HICP), is critical for the Euro’s value. When inflation exceeds expectations, particularly above the ECB’s 2% goal, it often prompts the ECB to raise rates, benefiting the Euro.
Economic data releases affect the Euro significantly. Metrics such as GDP, manufacturing and services PMIs, employment figures, and consumer sentiment can sway the Euro’s direction. Strong economic performance generally boosts the Euro, potentially leading the ECB to hike rates, whereas weak data can depress it.
The Trade Balance is another crucial economic indicator for the Euro. It measures the difference between export earnings and import spending. A positive Trade Balance, indicating strong exports, typically strengthens the currency.
