- EUR/USD gains ground near 1.0560 in the European session on Tuesday morning.
- The negative view of the pair prevails below the 100-day EMA with a bearish RSI indicator.
- The first bearish target to watch is 1.0480; the immediate resistance level emerges at 1.0623.
The EUR/USD pair is trading in positive territory around 1.0560 during the European session on Tuesday morning. However, the main pair’s upside appears limited amid growing bets for further cuts by the European Central Bank (ECB) on Thursday.
The ECB is widely expected to announce a 25 basis point (bps) rate cut at its December meeting on Thursday, although a rare 50 bps reduction remains possible. Market participants will monitor ECB President Christine Lagarde’s press conference after the monetary policy meeting as it could offer some clues on the future direction of policy and the possible timeline for additional rate cuts.
Technically, EUR/USD maintains the bearish vibe on the daily chart as the main pair remains capped below the key 100-day EMA. Furthermore, the bearish momentum is supported by the 14-day Relative Strength Index (RSI), which is below the midline around 45.20, indicating that the path of least resistance is to the upside.
Initial support level for the major pair emerges at 1.0480, the December 3 low. Any additional selling below the mentioned level could expose the lower boundary of the Bollinger Band at 1.0445. Extended losses could push prices towards 1.0332, the November 22 low.
To the upside, the first bullish barrier is seen near the upper boundary of the Bollinger Band at 1.0623. Sustained bullish momentum could see a rally towards 1.0787, the 100-day EMA. Further north, the next hurdle to watch is the psychological level of 1.0800.
EUR/USD Daily Chart
The Euro FAQs
The Euro is the currency of the 19 countries of the European Union 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 turnover of more than $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), headquartered in Frankfurt, Germany, is the reserve bank of the eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the increase or decrease in interest rates. Relatively high interest rates (or the expectation of higher rates) tend to benefit the euro and vice versa. The Governing Council of the ECB makes decisions on monetary policy at meetings held eight times a year. Decisions are made by the directors of the Eurozone’s national banks and six permanent members, including ECB President Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), are an important econometric indicator for the euro. If inflation rises more than expected, especially if it exceeds the ECB’s 2% target, it forces the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to their counterparts tend to benefit the euro, making the region more attractive as a place for global investors to park their money.
The published data measures the health of the economy and may have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence 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 may encourage the ECB to raise 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 eurozone economies (Germany, France, Italy and Spain) are especially significant, as they represent 75% of the eurozone economy.
Another important data that is published about 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 in-demand export products, its currency will gain value simply from the additional demand created by foreign buyers seeking to purchase those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of 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.
