EUR/USD backslides on Thursday, tests new multi-month low

• EUR/USD gave up another 0.6% as Greenback remains bid.
• The Euro is poised for further losses after falling to its lowest prices in over a year.
• Friday PMI releases to dominate the end of the week.

EUR/USD trimmed further into the low end on Thursday, continuing to shed weight in the near-term and falling to the lowest bids since November of 2023. All but one of the last eight trading weeks are in the red, and Fiber is set to continue declining unless the Euro finds a reason to materially appreciate.

Europe’s HCOB Purchasing Managers Index (PMI) numbers for November are due early in the European market window. Pan-EU Manufacturing PMI figures are expected to hold flat at a contractionary 46.0, with the European Services PMI component expected to tick up to 51.8 from 51.6.

Median market forecasts for the US side of Friday’s PMI release schedule call for a general upswing in activity expectations, with November’s US Manufacturing PMI expected to rise to 48.8 from 48.5. The Services PMI component is likewise forecast to increase to 55.3 from 55.0.

EUR/USD price forecast

The EUR/USD pair remains under sustained bearish pressure, trading near 1.0470 as sellers dominate. The price continues to trend below both the 50-day EMA at 1.0890 and the 200-day EMA at 1.0866, reinforcing the bearish outlook after a death cross formed in recent weeks. The downtrend has been unbroken since late October, with the pair hitting fresh multi-month lows. Immediate support lies at 1.0450, a psychological level that could attract buyers; a break below this area might expose 1.0400 as the next target.

The MACD indicator remains firmly bearish, with the MACD line staying below the signal line and the histogram deep in negative territory. Although the histogram shows subtle signs of easing, the overall momentum suggests limited prospects for a bullish reversal in the near term. Bulls need to reclaim the 50-day EMA to initiate a meaningful recovery, while bears will aim for further losses if the pair fails to hold above the 1.0450 threshold. Traders should watch for any significant price action around this support zone for clues about the pair's next move.

EUR/USD daily chart

Euro FAQs

What is the Euro?

The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily 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 over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all 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 put up 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 economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release 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 over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.