EUR/USD is on track to decline for the third consecutive week against the Greenback, starting off the new trading week with a fresh ten-week low. The Euro has weakened by one-quarter of one percent against the US Dollar, dropping into the 200-day Exponential Moving Average (EMA) as the USD continues to strengthen while the EUR weakens. The European Central Bank (ECB) is expected to trim rates by another 25 basis points this week.
Investors are keeping a close eye on the latest European Central Bank (ECB) Lending Survey results expected early in the week to gain insights into the overall health of the pan-European banking sector. Final European Harmonized Index of Consumer Prices (HICP) inflation figures are also set to be released, but they are unlikely to cause much volatility as focus remains on the ECB’s upcoming rate decision on Thursday.
The upcoming US Retail Sales data on Thursday is expected to accelerate to 0.3% MoM in September, following a lackluster 0.1% in August. The EUR/USD pair is under bearish pressure, falling into the 200-day EMA and sliding towards the 1.0900 level. The pair has seen a significant decline of nearly 3% from late September’s highs above 1.1200, closing in the red for most of the past 13 trading days.
The price action around the 200-day EMA will be crucial in determining the near-term direction of EUR/USD. A sustained break below this level could lead to further downside, with the next support level around 1.0850. However, a move back above 1.09063 and breaching the 50-day EMA resistance could ease the bearish pressure. The technical outlook remains bearish as long as the pair stays below the 50-day EMA, indicating continued downside risks in the near future.
The Euro is the currency used in the 19 European Union countries in the Eurozone, the second most traded currency globally after the US Dollar. The Euro accounted for 31% of all foreign exchange transactions in 2022, with an average daily turnover exceeding $2.2 trillion. The European Central Bank (ECB) in Frankfurt, Germany, manages monetary policy for the Eurozone, with a primary mandate of maintaining price stability. Eurozone data releases, including HICP inflation figures, economic indicators, and Trade Balance, play a crucial role in impacting the Euro’s strength against other currencies.
Inflation data, especially above the ECB’s 2% target, may lead to interest rate hikes to control inflation, benefiting the Euro. Strong economic indicators, such as GDP, PMIs, and employment data, influence the direction of the Euro, attracting more foreign investment and potentially leading to interest rate hikes. Positive Trade Balance strengthens a currency through increased demand for exports, while a negative balance can weaken the currency. Economic data from major Eurozone economies like Germany, France, Italy, and Spain significantly impact the overall strength of the Euro.
