EUR/USD Forecast: Bulls dominate as EU-US tensions hurt USD
- EUR/USD trades above 1.1700 in the European session on Tuesday.
- The technical outlook points to a buildup in bullish momentum.
- Political headlines could drive the pair's action in the absence of high-tier data releases.
EUR/USD gathers bullish momentum after closing in positive territory on Monday and trades above 1.1700 in the European session on Tuesday. The technical outlook highlight a buildup of bullish momentum in the short term but also points to overbought conditions.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.14% | -0.94% | 0.02% | -0.59% | -0.97% | -1.65% | -1.25% | |
| EUR | 1.14% | 0.20% | 1.17% | 0.55% | 0.16% | -0.51% | -0.12% | |
| GBP | 0.94% | -0.20% | 0.77% | 0.35% | -0.04% | -0.72% | -0.32% | |
| JPY | -0.02% | -1.17% | -0.77% | -0.58% | -0.96% | -1.62% | -1.24% | |
| CAD | 0.59% | -0.55% | -0.35% | 0.58% | -0.36% | -1.05% | -0.67% | |
| AUD | 0.97% | -0.16% | 0.04% | 0.96% | 0.36% | -0.68% | -0.28% | |
| NZD | 1.65% | 0.51% | 0.72% | 1.62% | 1.05% | 0.68% | 0.40% | |
| CHF | 1.25% | 0.12% | 0.32% | 1.24% | 0.67% | 0.28% | -0.40% |
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 persistent selling pressure surrounding the US Dollar (USD) helps EUR/USD push higher as investors react to the escalation tenstions between the United States (US) and the European Union (EU).
US President Donald Trump said that he will '100%' carry out Greenland tariffs threat. "Greenland is imperative for National and World Security. There can be no going back," he added. Meanwhile, US Treasury Secretary Scott Bessent explained that tariff threats by President Trump on several EU members over the Greenland’s dispute is very different than the other trade deals.
The only data featured in the US economic calendar will be the Employment Change 4-Week Average, published by the Automatic Data Processing (ADP). A positive print about 25K could help the USD find a foothold and limit EUR/USD's upside. On the flip side, a negative reading could put additional weight on the USD's shoulders.
In the meantime, US stock index futures were last seen losing between 1.5% and 1.8%. Although the USD benefits from risk-aversion, this time around investors could refrain from betting on a steady USD recovery because of the uncertainty surrounding the EU-US conflict.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1709. The 20-period Simple Moving Average (SMA) turns higher near 1.1629, while the 50-period SMA flattens around 1.1645. The pair trades above the 100-period and the 200-period SMAs, reflecting increasing buyer interest. Nevertheless, the Relative Strength Index (RSI) rises to 72.9 (overbought) and could restrain further gains in the near term.
Measured from the 1.1800 high to the 1.1593 low, the 61.8% Fibonacci retracement at 1.1720 aligns as the immediate ressitance level ahead of 1.1755 (Fibonacci 78.6% retracement) and 1.1800 (beginning point of the downtrend, static level). On the downside, 1.1700-1.1690 (200-period SMA, Fibonacci 50% retracement, 100-period SMA) could be seen as the first support area before 1.1670 (Fibonacci 38.2% retracement).
(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.
