- EUR/USD remains in positive territory near 1.0825 in the Asian session on Wednesday.
- The pair’s negative stance remains intact below the 100-period EMA and the bearish RSI indicator.
- The first upside target to watch is 1.0845; the key support level is seen in the 1.0795-1.0805 zone.
The EUR/USD pair is trading on a stronger note around 1.0825, snapping the two-day losing streak during the Asian session on Wednesday. However, the upside of the major pair could be limited amid uncertainty over further rate cuts in September by the European Central Bank (ECB) following disappointing economic growth data from Germany. Later on Wednesday, the Federal Reserve (Fed) interest rate decision will be in focus.
Technically, the bearish outlook for EUR/USD remains in place as the major pair remains below the key 100-period exponential moving average (EMA) on the 4-hour chart. The downside momentum is supported by the Relative Strength Index (RSI), which is below the midline around 43.90. This suggests that the path of least resistance is to the downside.
The potential upside target will emerge at 1.0845, the 100-period EMA. Any follow-through buying above this level would see the pair resume its upside. The next hurdle lies at 1.0870, representing the confluence of the upper boundary of the Bollinger Band and a high from July 29. Further north, the additional bullish filter to watch is the psychological mark of 1.0900.
On the other hand, the crucial support level is seen in the region of 1.0795-1.0805, representing the lower boundary of the Bollinger Band, a round figure and a low of July 30. A break of the mentioned level will see a drop to 1.0776, a high of July 1. The next containment level is located at 1.0709, a low of July 2.
EUR/USD 4-hour chart
Euro FAQs
The Euro is the currency of the 20 European Union countries that belong to the Eurozone. It is the second most traded currency in the world, behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily volume of over $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB), based in Frankfurt, Germany, is the reserve bank of the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s main mandate is to maintain price stability, which means controlling inflation or stimulating growth. Its main instrument is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher rates – generally benefit the Euro and vice versa. The Governing Council of the ECB takes monetary policy decisions at meetings held eight times a year. Decisions are taken by the heads of the national banks of the Eurozone and six permanent members, including ECB President Christine Lagarde.
Eurozone inflation data, as measured by the Harmonised Index of Consumer Prices (HICP), is an important econometric data point for the euro. If inflation rises more than expected, especially if it exceeds the ECB’s 2% target, the ECB is forced to raise interest rates to bring inflation back under control. Relatively high interest rates compared to their peers usually benefit the euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases measure the health of the economy and can influence the Euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can 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 can encourage the ECB to raise interest rates, which will directly strengthen the Euro. Conversely, if economic data is weak, the Euro is likely to fall. Economic data from the four largest Eurozone economies (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone economy.
Another important output 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 during a given period. If a country produces highly sought-after export products, its currency will appreciate due to the additional demand created by foreign buyers who wish to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
