Euro ticks up from six-week lows despite risk-averse markets, high Oil prices
- EUR/USD bounces up to 1.1635 from six-week lows near 1.1600.
- Risk-aversion and high Oil prices are likely to keep Euro bulls subdued.
- Analysts at UOB Bank see the pair's decline extending to 1.1570.
The Euro (EUR) is ticking higher against the US Dollar (USD) on Monday, trading near 1.1635 at the time of writing, after hitting fresh six-week lows a few pips above 1.1600 earlier on the day. The pair is shrugging off the dismal market sentiment, although high Oil prices are likely to keep upside attempts in check.
Geopolitical tensions are simmering again following an attack on a nuclear plant in the United Arab Emirates on Sunday, allegedly by Iran or one of its allies. US President Donald Trump warned that “the clock is ticking” on Tehran, after meeting its national security team and speaking with Israeli Prime Minister Benjamin Netanyahu to discuss options in Iran.
With the ceasefire in tatters, hopes of reopening the key Strait of Hormuz dissipate, and Oil prices escalate. The Brent barrel is rising to levels near $110.00, and the WTI Oil stands above $100, levels that put Crude-importing Eurozone economies against the wall, and are likely to weigh on Euro recoveries.
Analysts at UOB bank expect the pair to remain vulnerable, aiming for the 1.1570 area: "While the decline is oversold, strong downward momentum continues to suggest downside risk for EUR. From here, a clear break below 1.1600 will shift the focus to 1.1570. We will maintain our negative EUR view as long as it holds below the ‘strong resistance’ at 1.1685.”
Technical Analysis: A dead cat's bounce for the Euro
The EUR/USD is ticking up on Monday but maintains a bearish near-term tone with price holding below a dense band of horizontal resistance clustered between 1.1650 and 1.1675. The 4-hour Moving Average Convergence Divergence (MACD) remains in negative territory, hinting that downside pressure persists, while the Relative Strength Index (RSI) has bounced from deeply oversold readings, suggesting that sellers remain in control.
Upside attempts are likely to find resistance in the mentioned area above 1.1650, which held bears in April. Bulls would need to breach that area to ease negative pressure and aim for the May 14 high and May 8 and 12 lows in the area of 1.1720
On the downside, initial support emerges at session highs near 1.1610. Further down, there is no clear support before the early April lows between 1.1505 and 1.1525.
(The technical analysis of this story was written with the help of an AI tool.)
Euro FAQs
The Euro is the currency for the 20 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%).
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.
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.
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.
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.
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