Euro Rate TODAY: Forecasts Suggest Further EUR Weakness vs US Dollar and Pound Sterling (GBP) in the Weeks Ahead

The latest impetus for dollar gains and euro declines is the release of US Gross Domestic Product (Q2) which came in at 4%, well ahead of the expectation for a reading of 3%. Dollar buying is in favour at the moment

From a technical standpoint trend momentum against both the dollar and pound sterling also look negative.

Euro rates at the time of writing:

• The euro to dollar exchange rate (EUR/USD) is 0.23 pct lower at 1.3378.
• The euro to pound exchange rate (EUR/GBP) is unchanged at 0.7913.
• The euro to Australian dollar (EUR/AUD) is 0.46 pct higher at 1.4356.

Please note that retail currecy rates are subject to substantial spreads when delivered by your bank. An independent FX provider can deliver up to 5% more currency in some cases by getting you closer to the market rate.

In addition, if you do not wish to lose out on the best exchange rates ensure your provider has the relevant stop and buy orders in place. Find out more.

US dollar dries up demand for shared currency

Chris Towner, director of FX advisory services at foreign currency specialists, HiFX, comments on the latest US GDP figures:

“After a cold start to the year we have seen the US economy roar back into action in the second quarter with impressive annualised growth of 4%. Over the last few months we have seen the US economy change up a gear in order to keep up with its momentum, led by a jump in confidence in the jobs market. While the Central Bank continues to print money, albeit now at a much slower pace, investors continue to push equities to record highs helped by this cocktail of low rates and buoyant economy.

“All in all, this is the first of three big data releases with the Central Bank deciding on rates this evening and the employment report released on Friday. The US dollar has been strengthening with all this good news and also compared to the anaemic recovery that we are witnessing from Europe.

"Overall, confidence inspires further confidence and the US dollar looks set to have a better second half of the calendar year than the first half and to be the preferred choice of investors.”

Euro hampered by poor investor sentiment

IMM data - figures used to understand what traders are betting - shows net EUR shorts rose in the week to 22 July to the highest level since Nov 2012 indicating more currency market decision makers are taking a negative stance on the currency.

"Short positions are likely to have extended further since.  Sentiment towards EUR remains weak and there's little on the Eurozone calendar this week that looks likely to turn this around. Eurozone CPI could attract some interest; inflationary pressures are expected to remain benign. While it’s unlikely to impact ECB policy, it won't help confidence towards EUR," say Lloyds Bank Research in a currency briefing to clients.

Carl Hasty at Smart Currency Business notes that the Eurozone still has some significant problems and business confidence is stuttering. This was highlighted on Friday as the euro weakened against its major peers due to disappointing news from German businesses.

"The data from the IFO Index weakened to 108 in July from 109.7 in June and was worse than the forecast 109.4. One of the key reasons is the situation in Ukraine and the effect it is having on business morale on Germany and on the euro. The Eurozone could see more difficult times if tougher sanctions are imposed on Russia, and if the European Central Bank continues its aggressive stance on their monetary policy," says Hasty.

Technical forecasts for the euro dollar rate

EUR/USD came under pressure all last week – the 2012-2014 uptrend has given way and the market has sold off to the 1.3424 200 week moving average.

"A negative bias will remain entrenched below the 1.3565 downtrend. Around here we also find the 1.3391/1.3385 55 MONTH ma and the base of the monthly cloud. A close below the 1.3385 is expected to act as a catalyst on the downside. It is expected to act as a trigger for a slide to the 1.3295November 2013 low en route to 1.3020/00, the 50% retracement of the move up from the 1.2042/July 2012 low," says Karen Jones at Commerzbank.

Concerning her current trade recommendation Jones reckons: "Reinstate shorts on rallies to 1.3500, add 1.3550, stop 1.3565."

Barclays meanwhile advise they are maintaining a negative attitude towards the euro dollar rate over the course of the coming week:

"We remain bearish on the medium-term prospect of EURUSD given our view on the ECB and the Fed. No major surprises are expected from the FOMC this week, but we expect US data to be USD supportive while softer Euro area CPI to add further downward pressure to the EUR.

"In particular, the USD is set to strengthen further versus EUR and Eurozone “flash” CPI inflation this week (Thursday) may act as a catalyst for more EUR depreciation following last week’s decline in the currency. We forecast another benign reading of 0.4% y/y in July (consensus 0.5%), an outcome that will maintain pressure on the ECB to keep policy highly accommodative.

"EURUSD has dropped by around 4% from its highs just below 1.40 on 8 May and we expect further downside pressure in the weeks ahead."

Regarding the euro pound exchange rate outlook Swissquote Research tell us:

"EUR/GBP trades comfortably in the mid-range of June-July downtrend band (0.78673/0.79633). The overall bias remains bearish as long as resistance at 0.79330/0.79633 (21-dma / downtrend channel top) holds.

Also offering guidance on the euro pound is Karen Jones at Commerzbank:

"EUR/GBP last week sold off to the base of its down channel and bounced. The bounce has so far been pretty tepid and cannot seem to clear the 20 day ma at .7930. In fact the market has not seen anything more than marginal breaks of this moving average since the middle of March. However we also have the triple divergence of the daily RSI which suggests that the down move is exhausted for now. We noted the potential falling wedge and a close above .7930 should be enough to trigger a rally towards the .7991 2014 downtrend, where we would expect the rally to fail.