- EUR/USD came under renewed bearish pressure and declined toward 1.0850.
- Rising US Treasury bond yields continue to support the USD ahead of the Fed policy meeting.
- Additional losses could be seen in case 1.0860 support fails.
EUR/USD stays on the back foot and edges lower toward the 1.0850 area in the early European session on Tuesday, after closing in negative territory on Monday. The near-term technical outlook suggests that the bearish bias stays intact.
The US Dollar (USD) gathered strength against its rivals to begin the week and caused EUR/USD to stretch lower in the first half of the day on Monday. As Wall Street’s main indexes opened higher, the USD lost its bullish momentum and allowed the pair to limit its losses.
Nevertheless, with the benchmark 10-year US Treasury bond yield holding comfortably above 4.3% ahead of the Federal Reserve’s policy announcements on Wednesday, the USD stays resilient against its peers early Tuesday.
Euro price this week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.18% | 0.22% | 0.12% | 0.57% | 0.83% | 0.59% | 0.63% | |
| EUR | -0.18% | 0.03% | -0.07% | 0.40% | 0.66% | 0.41% | 0.42% | |
| GBP | -0.22% | -0.03% | -0.10% | 0.36% | 0.61% | 0.37% | 0.40% | |
| CAD | -0.12% | 0.07% | 0.09% | 0.47% | 0.71% | 0.47% | 0.49% | |
| AUD | -0.61% | -0.42% | -0.40% | -0.49% | 0.22% | -0.02% | 0.01% | |
| JPY | -0.86% | -0.68% | -0.58% | -0.74% | -0.26% | -0.26% | -0.24% | |
| NZD | -0.61% | -0.42% | -0.39% | -0.48% | -0.03% | 0.23% | 0.01% | |
| CHF | -0.62% | -0.43% | -0.40% | -0.50% | -0.02% | 0.22% | -0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Later in the session, ZEW economic sentiment survey for the Euro area and Germany will be featured in the European economic docket. February Housing Starts and Building Permits figures will be released from the US in the American session. Investors are unlikely to take large positions in response to these data releases.
Meanwhile, US stock index futures trade modestly lower on the day. A continuation of the risk rally after the opening bell could limit the USD’s gains and support EUR/USD. On the other hand, a negative shift in risk mood, combined with rising US T-bond yields, could make it difficult for the pair to find a foothold.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart declined below 40 and EUR/USD closed the last three 4-hour candles below the 100-period Simple Moving Average (SMA), highlighting a buildup of bearish momentum.
EUR/USD was last seen trading within a touching distance of 1.0860, where the Fibonacci 38.2% retracement of the latest uptrend is located. In case the pair drops below that level and fails to reclaim it, 1.0830 (200-period SMA, Fibonacci 50% retracement) could be seen as next bearish target before 1.0800 (Fibonacci 61.8% retracement).
On the upside, 1.0880 (100-period SMA) aligns as immediate resistance ahead of 1.0900 (Fibonacci 23.6% retracement) and 1.0920 (50-period SMA).
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.
