Euro Forecast: EUR/USD Downtrend to Extend to New 2024 Lows?

EUR/USD Key Points

• The economic calendar is perhaps less busy than usual for the world’s most widely-traded currency pair, but there are still some key data releases and revisions to watch.
• Both ECB and Fed speakers (including Jerome Powell) will be on the wires, so the similarities and contrasts between their views on monetary policy and interest rates over the first half of the year will provide a clear focus for EUR/USD traders.
• EUR/USD’s path of least resistance remains to the downside, with potential for the selling to accelerate toward 1.0700 if Eurozone economic data comes in soft or the US economy shows more signs of reacceleration.

EUR/USD Fundamental Analysis

Last week was a choppy one for EUR/USD as traders digested Eurozone CPI data, the US Federal Reserve meeting, and Friday’s NFP report.

Ultimately, it was Friday’s NFP report that tipped the pair into a bearish week, and the potential for a reacceleration of US growth (especially in contrasts to signs of slowing growth across the Atlantic in the Eurozone) that will be the theme most likely to carry over into this week. With the US labor market remaining strong, if not outright reaccelerating from here, traders have started to push back expectations for a March interest rate cut from the FOMC; no doubt Fed Chairman Powell’s explicit comment that such a move was unlikely helped reinforce that viewpoint.

As we outline below, the economic calendar is perhaps less busy than usual for the world’s most widely-traded currency pair, but there are still some key European data releases and revisions that will help traders gauge how the Eurozone economy is performing in relation to the US economy.

This Week’s Key Euro Data

In addition to the (mostly second-tier) US data and events in the coming week, these are the key reports for EUR/USD traders to watch:

Monday:

• German Trade Balance (Dec)
• Eurozone Services PMI (Jan)
• Sentix Investor Confidence (Feb)
• Eurozone Producer Price Index (Dec)

Tuesday:

• German Factory Orders (Dec)
• French Payrolls (Q4)
• Italian Business and Consumer Confidence (Jan)
• Eurozone Retail Sales (Dec)

Wednesday:

• German Industrial Production (Dec)
• French Trade Balance (Dec)
• Spanish Industrial Output (Dec)
• Italian Retail Sales (Dec)

Thursday:

• Eurozone Economic Bulletin
• ECB Member Elderson Speech
• ECB Member Lane Speech

Friday:

• German CPI (Jan)
• Italian Industrial Output (Dec)

While none of these releases quite reach the top tier of obvious market-moving data, I’ll be keeping a close eye on any revisions to the January PMI figures, the PPI reading, Eurozone Retail Sales, and the updates in the ECB Economic Bulletin for updates on the health of the Eurozone economy. In the same vein, both ECB and Fed speakers will be on the wires, so the similarities and contrasts between their views on monetary policy and interest rates over the first half of the year will provide a clear focus for EUR/USD traders.

Euro Technical Analysis – EUR/USD Daily Chart

Source: TradingView, StoneX

Speaking of the world’s most widely-traded currency pair, EUR/USD finished the week nearly 1% lower, putting a Dark Cloud Cover candlestick pattern on Friday. As the chart above shows, the pair remains within a 5-week bearish channel that could push EUR/USD below its 50% Fibonacci retracement to a fresh 2024 low in the coming week.

For now, EUR/USD’s path of least resistance remains to the downside, with potential for the selling to accelerate toward 1.0700 if Eurozone economic data comes in soft or the US economy shows more signs of reacceleration. Only a breakout above last week’s high in the 1.0900 zone would shift the bias back in favor of the bulls.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX