EUR/USD Forecast: Bearish pressure builds as trading conditions normalize
- EUR/USD trades below 1.1700 to start the new week.
- The technical outlook highlights a buildup of bearish momentum.
- The US economic calendar will feature ISM Manufacturing PMI data for December.
After ending the last week of the year in negative territory, EUR/USD stays on the back foot early Monday and trades at its weakest level since December 10, below 1.1700. The pair's technical outlook suggests that sellers look to retain control in the near term.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.26% | 0.22% | 0.08% | 0.31% | 0.28% | 0.31% | 0.22% | |
| EUR | -0.26% | -0.04% | -0.13% | 0.05% | 0.02% | 0.06% | -0.04% | |
| GBP | -0.22% | 0.04% | -0.13% | 0.09% | 0.05% | 0.09% | -0.00% | |
| JPY | -0.08% | 0.13% | 0.13% | 0.23% | 0.19% | 0.22% | 0.13% | |
| CAD | -0.31% | -0.05% | -0.09% | -0.23% | -0.04% | -0.00% | -0.09% | |
| AUD | -0.28% | -0.02% | -0.05% | -0.19% | 0.04% | 0.04% | -0.05% | |
| NZD | -0.31% | -0.06% | -0.09% | -0.22% | 0.00% | -0.04% | -0.09% | |
| CHF | -0.22% | 0.04% | 0.00% | -0.13% | 0.09% | 0.05% | 0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The broad-based US Dollar (USD) strength causes EUR/USD to push lower on Monday as markets adopt a cautious stance after the US military entered Venezuela over the weekend, capturing and bringing Venezuelan President Nicolás Maduro and his wife, Cilia Flores, to New York.
Maduro will reportedly face drug and weapons charges. Moreover, US President Donald Trump said that Washington might make a fresh military intervention if Venezuela’s interim president, Delcy Rodríguez, did not accommodate their demands.
In the second half of the day, the Institute for Supply Management (ISM) will publish the Manufacturing Purchasing Managers' Index (PMI) data for December. Markets expect the headline PMI to improve slightly to 48.3 from 48.2 in November. A positive surprise, with a reading above 50, could further support the USD, while a disappointing print could have the opposite impact on the currency's valuation.
Investors will also pay close attention to the underlying details of the survey. In case the Employment Index, which came in at 44 in November, declines further, the USD could come under selling pressure, even if the headline PMI arrives better than expected. Conversely, a significant recovery in the Employment Index is likely to boost the USD and cause EUR/USD to extend its slide.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) slopes lower beneath the 50- and 100-period SMAs, underscoring waning near-term momentum. The 100- and 200-period SMAs edge higher, while price holds below the 20-, 50-, and 100-period averages but remains above the 200-period one.
The 14-period RSI stands at 36, recovering from oversold but still below the midline, which suggests sellers retain the upper hand. The 200-period SMA aligns as the first support level at 1.1670. Measured from the 1.1503 low to the 1.1800 high, the 50% retracement at 1.1650 could be seen as the next support before 1.1615 (Fibonacci 61.8% retracement).
Bias would stabilize if the pair reclaims the short SMAs, with momentum improving on sustained trade above the 20-period average. Immediate resistance could be spotted at 1.1730 (Fibonacci 23.6% retracement) ahead of 1.1740 (100-period SMA, 20-period SMA) and 1.1760 (50-period SMA).
(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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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
