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- Euro keeps the consolidative mood around 1.1200
Euro keeps the consolidative mood around 1.1200
- Euro keeps the trade above 1.1200 against the US Dollar.
- Stocks in Europe trade with decent gains on Thursday.
- EUR/USD clings to small gains just above the 1.1200 mark.
- Producer Prices in Germany surprised to the upside in June.
- US weekly Initial Jobless Claims, Philly Fed Index take centre stage.
The Euro (EUR) manages to regain some balance and advance modestly against the U.S. Dollar (USD) on Thursday, encouraging EUR/USD to regain the area just above 1.1200 the figure against the backdrop of vacillating risk appetite trends.
The recent recovery in the greenback now appears somewhat dented and leaves the USD Index (DXY) hovering around the low-100.00s amidst the so far mild rebound in US yields.
Moving forward, spot is expected to engage in some sort of consolidative range ahead of key meetings by the Federal Reserve and the European Central Bank (ECB) next week. Having said that, both central banks are widely anticipated to hike rates by a quarter point, although an incipient divergence between them lies in their plans for the near-term future.
On this, the Fed is perceived as nearing the end of its tightening cycle, while ECB officials have sounded less hawkish recently on the prospects of additional hikes beyond summer.
In the euro docket, Producer Prices in Germany contracted 0.3% MoM in June and rose 0.1% over the last twelve months. In addition, the Current Account surplus in the euro area widened to €9.1B in May. Later in the session, the European Commission will publish its flash gauge of Consumer Confidence in the region for the current month.
In the US, usual weekly Initial Jobless Claims are due in the first turn, followed by the Philly Fed Manufacturing Index, the CB Leading Index, and Existing Home Sales.
Daily digest market movers: Euro looks to regain upside traction
- The EUR extends the rebound from the 1.1170 area against the USD.
- Germany’s Producer Prices came in on the strong side in June.
- The USD Index clings to gains beyond the 100.00 barrier.
- Speculation that the Fed’s July hike could be the last one runs high.
- US, German yields attempt a tepid bounce so far.
- The PBoC kept lending rates unchanged.
- Australian jobs report surprised to the upside in June.
Technical Analysis: Euro faces a minor support around 1.1170
EUR/USD seems to have now settled in a consolidative fashion around 1.1200 following recent overbought levels.
The pair printed a new 2023 high at 1.1275 on July 18. Once this level is cleared, there are no resistance levels of significance until the 2022 peak of 1.1495 recorded on February 10.
On the downside, there is a minor support at the weekly low at 1.1174 (July 19) prior to the psychological 1.1000 mark, all seconded by provisional support at the 55-day and 100-day SMAs at 1.0896 and 1.0877, respectively, ahead of the July low of 1.0833 (July 6). The breakdown of this region should meet the next contention area at the key 200-day SMA at 1.0681 prior to the May low of 1.0635 (May 31). South from here emerges the March low of 1.0516 (March 15) before the 2023 low of 1.0481 (January 6).
Furthermore, the constructive view of EUR/USD appears unchanged as long as the pair trades above the key 200-day SMA.
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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