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- Euro slumps to multi-day lows well below 1.0900 vs. the US Dollar
Euro slumps to multi-day lows well below 1.0900 vs. the US Dollar
- Euro adds to Thursday’s negative price action.
- No respite for the sell-off in stocks markets in Europe on Friday.
- EUR/USD plunges to multi-session lows near 1.0850.
- Disheartening prints in the euro docket weigh on the pair.
- The USD Index (DXY) reclaims the 103.00 mark and beyond.
The selling pressure remains well and sound around the Euro (EUR) and the rest of the risk-associated assets, and this time it forces EUR/USD to surrender further ground and breach the key support at 1.0900 the figure.
The pair has so far given away more than a cent since Thursday’s fresh monthly peak above the psychological 1.1000 barrier.
In fact, the European currency saw its decline exacerbated in response to poor prints from the advanced Manufacturing and Services PMIs in both France and Germany for the month of June, which in turn reignited recession concerns in the region.
On the USD-side of the equation, the USD Index (DXY) advances to fresh tops just above the 103.00 hurdle, underpinned by the downside bias in the risk complex and the persistent hawkish narrative from the Federal Reserve’s speakers, including Chief Jerome Powel.
The potential next moves by both the Federal Reserve and the European Central Bank in normalizing their monetary policies are at the centre of the debate in the macroeconomic scenario against the backdrop of an increasing speculation of an economic slowdown on both sides of the Atlantic.
It is PMI-day across the pond too, while St. Louis Fed J. Bullard (2025 voter, hawk), Atlanta Fed R. Bostic (2024 voter, hawk) and Cleveland Fed L. Mester (2024 voter, hawkish) are also due to speak later in the NA session.
Daily digest market movers: Recession fears weigh on the FX universe
- The US Dollar’s recovery gathers fresh steam.
- Flash Manufacturing and Services PMIs in France and Germany disappoint.
- Recession concerns, Chinese lagged recovery hurt traders’ sentiment.
- Upcoming Fed-speak is likely to fan the flames of the hawkish narrative.
Technical Analysis: Euro faces the next support at 1.0800
EUR/USD comes under heavy downside pressure, and the breakdown of the 1.0900 support has opened the door to a probable test of the interim 100-day SMA at 1.0807. The loss of the latter exposes a deeper pullback to the May low of 1.0635 (May 31) ahead of the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).
If bulls regains the upper hand, the next hurdle is then expected at the June peak of 1.1012 (June 22) prior to the 2023 high of 1.1095 (April 26), which is closely followed by the round level of 1.1100. North from here emerges the weekly top of 1.1184 (March 31, 2022), which is supported by the 200-week SMA at 1.1181, just before another round level at 1.1200.
The constructive view of EUR/USD appears unchanged as long as the pair trades above the crucial 200-day SMA, today at 1.0563.
Euro FAQs
What is the Euro?
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
What is the ECB and how does it impact the Euro?
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
How does inflation data impact the value of the Euro?
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
How does economic data influence the value of the Euro?
Data releases gauge the health of the economy and can 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. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
How does the Trade Balance impact the Euro?
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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