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EUR/USD Forecast: Bullish bias remains intact in near term

  • EUR/USD stays in a consolidation phase near 1.1600 on Wednesday.
  • ECB President Lagarde's comments help the Euro hold its ground.
  • A re-escalation of the Middle East conflict could hurt the pair.

Following the bearish action seen in the first half of the day on Tuesday, EUR/USD staged a decisive rebound in the American session to end the day virtually unchanged. The pair fluctuates in a narrow channel at around 1.1600 in the European session on Wednesday as investors await clarity regarding the Middle East conflict.

Euro Price This week

The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.49%-0.61%-0.30%0.51%0.40%0.00%0.24%
EUR0.49%-0.12%0.22%1.01%0.88%0.51%0.75%
GBP0.61%0.12%0.28%1.13%1.02%0.63%0.80%
JPY0.30%-0.22%-0.28%0.78%0.69%0.27%0.44%
CAD-0.51%-1.01%-1.13%-0.78%-0.09%-0.51%-0.27%
AUD-0.40%-0.88%-1.02%-0.69%0.09%-0.39%-0.23%
NZD-0.01%-0.51%-0.63%-0.27%0.51%0.39%0.17%
CHF-0.24%-0.75%-0.80%-0.44%0.27%0.23%-0.17%

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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Israeli Channel 12 claimed late Tuesday that a one-month ceasefire in the United States' and Israel's war against Iran could be announced in accordance with the mechanism developed by Steve Witkoff and Jared Kushner.

Other reporting on the matter suggested that the proposal is complex and has 15 points that need to be agreed upon for the Strait of Hormuz to be reopened. The framework of the proposal is said to be negotiated during the ceasefire period. The US Dollar (USD) came under bearish pressure with the immediate reaction to this headline and helped EUR/USD gather recovery momentum.

Nevertheless, investors remain cautious with the Iranian side dismissing the claims of negotiations. Additionally, Iran's Revolutionary Guards said early Wednesday that they had fired missiles at Israel as well as military bases hosting US forces in Kuwait, Jordan and Bahrain.

Meanwhile, "the case for action becomes stronger when deviations from our inflation target grow larger and more persistent," European Central Bank (ECB) President Christine Lagarde said on Wednesday. This comment seems to be further supporting the Euro.

In the absence of high-tier data releases, investors will continue to pay close attention to fresh developments surrounding the Middle East crisis. In case markets grow increasingly optimistic about the sides reaching a ceasefire to negotiate the terms of a potential agreement, risk flows could dominate the action in financial markets and allow EUR/USD to push higher. On the other hand, Oil prices could rise again and trigger another bout of flight to safety if Iran rejects any attempts to end the conflict. In this scenario, EUR/USD could lose its traction.

Chart Analysis EUR/USD

EUR/USD Technical Analysis:

In the 4-hour chart, EUR/USD trades at 1.1605. The near-term bias is mildly bullish as price holds above the rising 20- and 50-period Simple Moving Averages (SMAs) and has reclaimed the 100-period SMA near 1.1563, suggesting buyers are gaining control despite the longer-term 200-period SMA still capping the broader trend near 1.1700. Bollinger Bands flatten with spot trading in the upper half of the envelope, indicating firm but not overstretched upside pressure, while the Relative Strength Index (RSI) around 57 reinforces a positive momentum backdrop rather than overbought conditions.

Immediate support emerges at 1.1530, reinforced by the nearby 50-period SMA, with further downside protection at 1.1500 ahead of the more distant 1.1460 level. On the topside, initial resistance stands at 1.1630, aligning with the upper Bollinger Bank, ahead of the static level at 1.1670 and the 200-period SMA in the 1.1690-1.1700 region.

(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.

(The story was corrected on March 25 at 09:40 GMT to say that the Israeli Channel 12's claim about a possible ceasefire is for a one-month period, not for 12 months, and corrected again at 10:35 GMT to fix the misspelling of Steve Witkoff.)

Author

Eren Sengezer

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.

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