EUR/USD slips below 1.1400 amid strong US data and soft French inflation
- The Euro drops to 1.1335 amid US Dollar rebound, diverging inflation paths and mixed ECB policy signals.
- US Consumer Confidence surges to 4-year high, boosting DXY above 99.50.
- France’s cooling inflation raises bets on ECB rate cuts despite hawkish pushback.
EUR/USD technical outlook: Struggles at 1.14, dives beneath 1.1350 with eyes on 1.13
EUR/USD is upwardly biased, although it faced stiff resistance at 1.1400. Monday’s price action formed an ‘inverted hammer’, a candlestick pattern that indicates sellers may be gaining control. However, further confirmation was needed at the time. As of writing, the pair has fallen below Monday’s low of 1.1358, opening the door for lower prices.
A daily close below the latter could send EUR/USD diving towards the 1.1300 figure. Further downside is seen at the 20-day Simple Moving Average (SMA) at 1.1267, followed by the 1.1200 mark.
On the upside, if EUR/USD stays above 1.1375, the next resistance would be the May 26 high of 1.1418, followed by 1.1450 and 1.1500.
Euro FAQs
The Euro is the currency for the 19 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.