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- Euro remains capped by 1.0900 ahead of NFP
Euro remains capped by 1.0900 ahead of NFP
- Euro comes under pressure around 1.0880 vs. the US Dollar.
- Stocks in Europe extend the weekly rout so far.
- EUR/USD falters once again around the 1.0900 region.
- US jobs report takes centre stage later in the session.
- ECB’s Christine Lagarde, Luis De Guindos speak later in the day.
The Euro (EUR) fails to surpass the key 1.0900 barrier vs. the US Dollar (USD) so far on Friday, allowing the resumption of the selling bias around EUR/USD amidst the broad-based cautious trade prior to the release of the US labour market report for the month of June.
In the meantime, the Greenback’s price action remains directionless when gauged by the USD Index (DXY), while the recent strong rebound in US seems to be taking a breather at the end of the week.
The potential future actions of the Federal Reserve and the European Central Bank (ECB) in normalizing their monetary policies remain a topic of ongoing debate amidst increasing bets about an economic slowdown on both sides of the Atlantic.
Furthermore, the likeliness of a 25 basis point rate hike by the Fed at its July meeting has been lately reinforced in response to robust results from the US calendar, which kept showing a resilient US economy and a tight labour market.
In the domestic data space, Industrial Production in Germany contracted 0.2% MoM in May, while Retail Sales in Italy expanded 0.7% also in May vs. the previous month.
Across the Atlantic, consensus expects the US economy to have created 225K jobs in June and the Unemployment Rate to have eased to 3.6% in the same period.
Daily digest market movers: Euro looks prudent prior to Payrolls
- The EUR keeps the price action subdued for the time being.
- Germany’s Industrial Production surprised to the downside.
- US jobs report grabs all the attention on Friday.
- Investors continue to price in a 25 bps hike by the Fed in July.
- ECB’s Lagarde, de Guindos speak later in the session.
Technical Analysis: Euro faces a tough barrier around 1.0900
The inability of EUR/USD to gather some convincing upside traction has prompted sellers to remain in control of the pair for the time being.
That said, the loss of the weekly low at 1.0833 (July 6) could open the door to a test of the interim 100-day SMA at 1.0826. The breakdown of the latter should meet the next contention area not before 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).
On the other hand, occasional bullish attempts should clear the 1.0900 region to expose a potential move to 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 1.1180, 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 1.0618.
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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