EUR/USD benefited from the broad-based selling pressure surrounding the US Dollar (USD) on Tuesday and touched its highest level since October 2021 above 1.0640. After staging a downward correction, the pair seems to have entered a consolidation phase at around 1.0600 in the European session on Wednesday.
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.19% | -1.49% | -0.76% | -0.17% | -0.96% | -1.14% | -1.24% | |
| EUR | 1.19% | -0.31% | 0.52% | 1.05% | 0.20% | 0.06% | -0.07% | |
| GBP | 1.49% | 0.31% | 0.87% | 1.37% | 0.52% | 0.37% | 0.24% | |
| JPY | 0.76% | -0.52% | -0.87% | 0.57% | -0.24% | -0.34% | -0.57% | |
| CAD | 0.17% | -1.05% | -1.37% | -0.57% | -0.75% | -0.97% | -1.11% | |
| AUD | 0.96% | -0.20% | -0.52% | 0.24% | 0.75% | -0.16% | -0.27% | |
| NZD | 1.14% | -0.06% | -0.37% | 0.34% | 0.97% | 0.16% | -0.14% | |
| CHF | 1.24% | 0.07% | -0.24% | 0.57% | 1.11% | 0.27% | 0.14% |
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 US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Improving risk mood following news of a ceasefire agreement between Israel and Iran triggered a selloff in the USD late Monday and that action continued in the first half of the day on Tuesday.
During the American trading hours, comments from Federal Reserve (Fed) Chairman Jerome Powell helped the USD limit its losses and capped EUR/USD’s upside. While testifying before the House Financial Services Committee, Powell pushed back against the market expectation for a rate cut in July. Powell reiterated that they are not in a rush to ease the policy, explaining that they need more time to confirm that inflation pressures caused by tariffs will remain contained before cutting rates.
Later in the day, Powell will speak before the Senate Banking Committee in the second day of his testimony. He is unlikely to offer any fresh hints regrading the rate outlook.
Meanwhile, US stock index futures trade flat in the European session, suggesting that Tuesday’s risk rally is unlikely to continue on Wednesday. Nevertheless, in case Wall Street’s main indexes gain traction after the opening bell, the USD could have a difficult time staying resilient against its rivals and allow EUR/USD to edge higher.
EUR/USD remains slightly above the mid-point of the ascending channel and the Relative Strength Index (RSI) indicator on the 4-hour chart moves sideways above 60, suggesting that the bullish bias remains intact but lacks momentum.
On the upside, 1.1640 (static level) aligns as the next resistance level before 1.1690-1.1700 (upper limit of the ascending channel, round level). Looking south, supports could be seen at 1.1600 (mid-point of the ascending channel), 1.1540 (50-period Simple Moving Average) and 1.1500 (lower limit of the ascending channel).
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.
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