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EUR/USD escapes Wednesday’s holiday volatility trap, set for wait to meaningful data

  • EUR/USD drifted mostly sideways on sedate Wednesday, heads into quiet Thursday.
  • Fiber traders will be on the lookout for Thursday’s US unemployment applications.
  • Friday looms ahead with PMI activity figures on both sides of the Pacific.

EUR/USD cycled on Wednesday with US markets out for a midweek holiday, and the Fiber heads into the back half of the trading week with mid-tier data on the offering, leaving investors to look ahead to Friday’s Purchasing Managers Index (PMI) activity figures for meaningful data releases to drive sentiment in either direction.

Forex Today: Attention shifts to the BoE and US data

American markets will be back in action on Thursday, just in time for the release of the latest US Initial Jobless Claims for the week ending June 14. The median market forecasts anticipate a modest drop in new US jobless benefit claims to 235K from the previous 242K, but they are still expected to surpass the four-week running average of 227K.

The European Central Bank’s (ECB) latest Economic Bulletin is also expected early in the Thursday market window, but little new information is expected as the ECB rehashes what has already been covered in previous public appearances from ECB policymakers following the latest rate call.

Friday will end the trading week with a hectic thump. Pan-European PMI survey figures will begin dropping on markets starting at 07:30 GMT, to be followed by US PMI figures at 13:45 GMT. The Pan-European HCOB Manufacturing Purchasing Managers’ Index (PMI) is expected to increase to 47.9 month-over-month (MoM) from 47.3, with the Services component forecasted to rise to 53.5 from 53.2. On the US side, both the Manufacturing and Services components are anticipated to decrease. The Manufacturing component is expected to ease to 51.0 from 51.3, and the Services PMI is forecasted to drop to 53.3 from 54.8.

EUR/USD technical outlook

The EUR/USD is currently facing resistance from the 200-hour Exponential Moving Average (EMA) at 1.0767, making it challenging for the currency pair to surpass the 1.0750 mark. Although it has shown some recovery from recent lows near 1.0670, the upward momentum is hindered. The daily candlesticks indicate a potential bullish move towards the 200-day EMA around 1.0800. 

However, the presence of technical resistance near 1.1140 from late December’s peaks is limiting bullish momentum. If this trend continues, the EUR/USD could experience a downside reversal, potentially leading to new lows for 2024, possibly falling below 1.0600.

EUR/USD hourly chart

EUR/USD daily chart

Euro FAQs

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%).

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.

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.

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.

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.