EUR/USD Forecast: Bullish stance stays intact despite pullback
- EUR/USD trades below 1.1750 to begin the new week.
- The technical outlook suggests that the bullish bias remains unchanged in the short term.
- The European Central Bank will announce policy decisions later in the week.
After rising nearly 1% in a two-day rally following the Federal Reserve (Fed) policy announcements last week, EUR/USD entered a consolidation phase and closed virtually unchanged on Friday. The pair stays relatively calm to start the new week and fluctuates in a tight channel below 1.1750.
Euro Price This Month
The table below shows the percentage change of Euro (EUR) against listed major currencies this month. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.15% | -0.93% | -0.73% | -1.51% | -1.46% | -0.83% | -0.90% | |
| EUR | 1.15% | 0.22% | 0.44% | -0.37% | -0.32% | 0.31% | 0.24% | |
| GBP | 0.93% | -0.22% | 0.46% | -0.59% | -0.54% | 0.09% | 0.02% | |
| JPY | 0.73% | -0.44% | -0.46% | -0.80% | -0.77% | -0.13% | -0.20% | |
| CAD | 1.51% | 0.37% | 0.59% | 0.80% | -0.01% | 0.68% | 0.61% | |
| AUD | 1.46% | 0.32% | 0.54% | 0.77% | 0.00% | 0.64% | 0.56% | |
| NZD | 0.83% | -0.31% | -0.09% | 0.13% | -0.68% | -0.64% | -0.07% | |
| CHF | 0.90% | -0.24% | -0.02% | 0.20% | -0.61% | -0.56% | 0.07% |
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).
The broad-based USD weakness allowed EUR/USD to gather bullish momentum in the second half of the previous week as investors started to price in a dovish Fed policy outlook next year.
The USD Index holds steady early Monday, with market participants gearing up for key data releases. On Tuesday, the US Bureau of Labor Statistics (BLS) will publish the Nonfarm Payrolls (NFP) data and release the Consumer Price Index (CPI) figures on Thursday.
More importantly, the European Central Bank (ECB) will conduct its last policy meeting of the year and announce the rate decision, alongside revised macroeconomic projections, on Thursday.
Ahead of these events, investors could refrain from taking large positions and allow EUR/USD to stay in a tight range.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) climbs above the 50-, 100- and 200-period SMAs, all of which rise, with price holding above them. This bullish alignment suggests buyers remain in control, while the 20 SMA at 1.1708 offers an interim dynamic support. The RSI (14) prints 63, above the midline, reinforcing positive momentum. Moreover, the pair remains within an ascending regression channel coming from late November.
The rising trend line from 1.1500 underpins the bullish bias. Immediate resistance aligns at 1.1775 (upper limit of the ascending channel), followed by 1.1800 (round level, psychological level). The first support level is seen at 1.1720 (mid-point of the ascending channel) ahead of 1.1670-1.1660 area, where the lower limit of the ascending channel, the 50-period SMA and the rising trend line meet.
(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.
