The Euro (EUR) edges lower against the US Dollar (USD) on Wednesday as the Greenback remains well supported amid cautious market sentiment driven by the ongoing US-Iran war. The USD gained additional support after US inflation data came in line with forecasts, reinforcing expectations that the Federal Reserve (Fed) will maintain a cautious policy stance with inflation still running above its 2% target.
At the time of writing, EUR/USD is trading around 1.1569, hovering just above the nearly four-month low hit earlier this week, while losing about 0.36% on the day.
From a technical perspective, EUR/USD remains in a sustained downtrend after peaking at 1.2082 on January 27, its highest level since June 2021. Since then, the pair has established a clear sequence of lower highs and lower lows, highlighting persistent selling pressure.
The near-term bias leans bearish as spot holds below the gently flattening 100-day Simple Moving Average (SMA) near 1.1696, indicating that sellers remain in control.
Momentum indicators also lean negative. The 14-day Relative Strength Index (RSI) has slipped toward 33, approaching oversold territory and signaling weak momentum.
The Moving Average Convergence Divergence (MACD) line remains below its signal line and under the zero line with a negative histogram. Even though the red histogram bars are contracting, momentum remains tilted to the downside.
At the same time, the Average Directional Index (ADX) near 29 signals strengthening trend conditions, suggesting that the current bearish move may continue to gain traction.
On the downside, immediate support is seen near the 1.1500 psychological level, which closely aligns with Monday’s low. A decisive break below this zone could open the door for a move toward 1.1450, followed by 1.1400.
On the upside, 1.1650 may act as the first resistance ahead of the 100-day SMA near 1.17, which could cap recovery attempts. A daily close above 1.1700 would be needed to invalidate the current bearish bias and shift focus toward the 1.1800-1.1825 resistance area.
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.
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