EUR/USD Forecast: Bulls hesitate as focus shifts to Trump
- EUR/USD retreats toward 1.1700 following a two-day rally.
- The near-term technical outlook suggests that the bullish bias remains intact.
- US President Donald Trump will deliver a speech at Davos on Wednesday.
Following a two-day rally that lifted EUR/USD to a fresh three-week high above 1.1750, the pair corrects lower toward 1.1700 in the European session on Wednesday. Investors adopt a cautious stance as they await US President Donald Trump's speech at the World Economic Forum in Davos.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.09% | -0.60% | 0.09% | -0.57% | -1.19% | -1.78% | -1.13% | |
| EUR | 1.09% | 0.50% | 1.15% | 0.52% | -0.11% | -0.70% | -0.05% | |
| GBP | 0.60% | -0.50% | 0.42% | 0.02% | -0.60% | -1.20% | -0.54% | |
| JPY | -0.09% | -1.15% | -0.42% | -0.63% | -1.24% | -1.82% | -1.17% | |
| CAD | 0.57% | -0.52% | -0.02% | 0.63% | -0.60% | -1.20% | -0.56% | |
| AUD | 1.19% | 0.11% | 0.60% | 1.24% | 0.60% | -0.60% | 0.06% | |
| NZD | 1.78% | 0.70% | 1.20% | 1.82% | 1.20% | 0.60% | 0.66% | |
| CHF | 1.13% | 0.05% | 0.54% | 1.17% | 0.56% | -0.06% | -0.66% |
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).
In the absence of high-impact data releases, the risk-averse market atmosphere made it difficult for EUR/USD to preserve its bullish momentum in the American session. Wall Street's main indexes opened lower and ended the day deep in negative territory after returnig from a long weekend.
Early Wednesday, European Central Bank (ECB) President Christine Lagarde argued that there would be a a slight inflationary effect if the US raises tariffs on European imports. She explained that they could see a stronger impact on Germany than on France, adding that European countries would be much stronger if they scrapped non-tariff trade barriers within the bloc.
US President Trump is expected to comment on the Greenland issue and how it could impact the EU-US relations. In case Trump reiterates his intentions to use tariffs against European nations that oppose the purchase of Greenland, safe-haven flows could continue to dominate the financial markets. However, the market action seen since the beginning of the week suggests that the US Dollar could have a hard time attracting safe-haven demand, especially if investors see Trump's aggressive trade regime as more harmful to the US economy than Europe.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1710. The 20-period Simple Moving Average (SMA) has turned higher above the 50 SMA, while both remain beneath the declining 100 SMA and the mildly rising 200 SMA. Price holds above all these averages, underscoring an improving near-term tone. The Relative Strength Index (RSI) prints at 63 (positive), easing from earlier overbought readings and supporting bullish momentum without being stretched.
Measured from the 1.1800 high to the 1.1592 low, the 50% retracement aligns as the first support level near 1.1700, which is also reinforced by the 200-period SMA, ahead of 1.1685 (100-period SMA) and 1.1670 (Fibonacci 38.2% retracement). On the upside, the 61.8% retracement at 1.1721 acts as immediate resistance ahead of 1.1755 (78.6% 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.
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.
