The Euro (EUR) experienced a decline against the US Dollar (USD) on Friday, relinquishing earlier intraday advances as renewed demand for the Greenback placed significant pressure on the currency pair. Currently, EUR/USD is trading flat near the 1.1600 mark, having recently touched its lowest level since November 28.
The US Dollar found support from unexpectedly strong economic data that has bolstered expectations that the Federal Reserve (Fed) is unlikely to lower interest rates in the near future. Additionally, comments from Kevin Hassett, the Director of the White House National Economic Council, helped to mitigate investor concerns regarding the recent political turmoil surrounding the Fed. Speaking on Fox Business Network, Hassett stated, “there’s nothing to see here,” attributing cost overruns mentioned by Fed Chair Jerome Powell to factors such as asbestos, thereby attempting to stabilize market sentiment.
From a technical analysis standpoint, the EUR/USD currency pair is facing sustained selling pressure, having dipped below crucial moving averages on the daily chart. The pair is currently trading under the 21-day Simple Moving Average (SMA) near 1.1707, as well as the 50-day and 100-day SMAs clustered around the 1.1660-1.1665 range. This setup suggests a bearish trend, with formidable overhead resistance affecting price movements.
Momentum indicators further support the bearish outlook. The Moving Average Convergence Divergence (MACD) is showing a position below the signal line and remains in negative territory, with a flat negative histogram indicating ongoing bearish momentum. Meanwhile, the Relative Strength Index (RSI) hovers around 34, revealing weak buying interest and keeping the pair close to oversold conditions.
Looking at support levels, the 1.1585-1.1600 area is currently acting as immediate support. A decisive break below this range could expose the pair to further declines towards the 1.1550 level, followed by the significant psychological mark of 1.1500. On the upside, any potential rebound would likely encounter strong resistance in the 1.1660-1.1700 range, where the aforementioned moving averages converge. Only a daily close above this critical zone could alleviate near-term bearish pressure and support a more substantial recovery.
In the broader context, the Euro serves as the official currency for the 20 countries within the Eurozone, making it the second most traded currency worldwide after the US Dollar. In 2022, the Euro represented approximately 31% of all foreign exchange transactions, averaging a daily turnover exceeding $2.2 trillion. The EUR/USD pair is the most traded currency pair globally, accounting for an estimated 30% of all transactions.
The European Central Bank (ECB), based in Frankfurt, Germany, governs monetary policy and sets interest rates for the Eurozone. The institution’s primary goal is to maintain price stability, which involves managing inflation or stimulating economic growth. The ECB’s decisions, typically made during eight annual meetings involving heads of Eurozone national banks and six permanent members, including President Christine Lagarde, significantly influence the Euro’s value.
Inflation data within the Eurozone, particularly as measured by the Harmonized Index of Consumer Prices (HICP), plays a crucial role in the currency’s dynamics. If inflation exceeds the ECB’s 2% target, it may compel the Bank to raise interest rates, subsequently strengthening the Euro. Similarly, robust economic data, including GDP growth rates, Purchasing Managers’ Indices (PMIs), and trade balance figures, impact investor sentiment toward the Euro. A thriving economy can attract foreign investment and prompt the ECB to increase interest rates, thus furthering the Euro’s strength.
In conclusion, ongoing developments in US economic performance, Fed policy outlooks, and Eurozone economic indicators will likely continue to shape future movements of the EUR/USD pair, as investors remain vigilant amid fluctuating market dynamics.
