- EUR/USD is trading higher near 1.1095 during the Asian session on Monday.
- The pair maintains a positive outlook above the 100-period EMA, with the RSI indicator bullish.
- The immediate resistance level emerges in the region of 1.1100-1.1105; the initial support level is located at 1.1072.
The EUR/USD pair is gaining ground around 1.1095 amid weakening US Dollar (USD) during Asian trading hours on Monday. Investors will be keeping a close eye on the US Federal Reserve (Fed) monetary policy meeting on Wednesday for further clues on how aggressively the Fed will cut interest rates.
EUR/USD remains capped below the downtrend channel on the four-hour chart. However, the constructive view on the major pair prevails as the price remains above the key 100-period exponential moving averages (EMAs). Moreover, the bullish momentum is supported by the Relative Strength Index (RSI), which is above the midline near 63.65, suggesting that the path of least resistance is to the upside.
A decisive break above the 1.1100-1.1105 zone, the psychological level and the upper boundary of the trend channel could see a rally towards 1.1155, the high of September 6. Further north, the next upside barrier is seen near 1.1200, the high of August 26.
On the other hand, the September 14 low at 1.1072 acts as an initial support level for the major pair. The next containment level to watch is 1.1061, the 100-period EMA. A break of the mentioned level could see a drop towards 1.1026, the September 3 low. The additional downside filter emerges at 1.0985, the lower boundary of the trend channel.
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 Harmonized 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.
