EUR/USD Forecast: Bulls show signs of exhaustion after key events
- EUR/USD holds steady above 1.1700 after posting losses on Thursday.
- The near-term technical outlook highlights a loss of bullish momentum.
- ECB left key rates unchanged after the December meeting, as expected.
EUR/USD fluctuates in a tight channel above 1.1700 after posting marginal losses on Thursday. The pair's technical outlook points to a lack of buyer interest in the short term.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.22% | 0.06% | 0.33% | 0.17% | 0.66% | 0.73% | -0.11% | |
| EUR | -0.22% | -0.16% | 0.09% | -0.05% | 0.47% | 0.50% | -0.32% | |
| GBP | -0.06% | 0.16% | 0.38% | 0.12% | 0.63% | 0.67% | -0.17% | |
| JPY | -0.33% | -0.09% | -0.38% | -0.15% | 0.35% | 0.39% | -0.22% | |
| CAD | -0.17% | 0.05% | -0.12% | 0.15% | 0.49% | 0.55% | -0.13% | |
| AUD | -0.66% | -0.47% | -0.63% | -0.35% | -0.49% | 0.04% | -0.79% | |
| NZD | -0.73% | -0.50% | -0.67% | -0.39% | -0.55% | -0.04% | -0.83% | |
| CHF | 0.11% | 0.32% | 0.17% | 0.22% | 0.13% | 0.79% | 0.83% |
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).
EUR/USD gathered bullish momentum and climbed above 1.1760 in the early American session on Thursday as markets reacted to the European Central Bank's (ECB) policy announcements and soft inflation data from the US.
The ECB left key rates unchanged as widely expected and the new economic projections showed that the economic growth forecasts has been revised up to 1.4% in 2025, 1.2% in 2026 and 1.4% in 2027. In the post-meeting press conference, ECB President Christine Lagarde explained that they can't offer forward guidance on policy, given the uncertainty surrounding the outlook. Lagarde also noted that they don't target exchange rates but added that they pay close attention to the Euro's appreciation.
The US Bureau of Labor Statistics (BLS) reported on Thursday that annual inflation, as measured by the Consumer Price Index (CPI), softened to 2.7% in November. In this period, the core CPI rose by 2.6%. Both of these readings came in below analysts' estimate and caused the USD to come under bearish pressure with the immediate reaction.
Later in the American session, the negative shift seen in risk mood supported the USD and forced EUR/USD to reverse its direction. Existing Home Sales data for November and the final revision to the University of Michigan's Consumer Sentiment Index data for December will be featured in the economic calendar, which are unlikely to trigger a significant market reaction.
In case markets remain risk-averse with a bearish opening in Wall Street, EUR/USD could have a difficult time regaining its traction heading into the weekend. At the time of press, US stock index futures were trading mixed. Additionally, end-of-the-week flows ahead of the Christmas holiday could ramp up the pair's volatility and cause irregular movements.
Technical Analysis:
The 20-period Simple Moving Average (SMA) has flattened just above price at 1.1738, capping near-term upside. The 50-period SMA rises at 1.1715, while the 100- and 200-period SMAs climb at 1.1670 and 1.1615, keeping the broader tone supported. However, the Relative Strength Index (14) sits at 46, below the midline, pointing to subdued momentum.
The lower limit of the ascending regression channel and the 50-period SMA offer immediate support at 1.1715, just before the rising trend line at 1.1695. Below the latter, 1.1670 (100-period SMA) and 1.1615 (200-period SMA) could be seen as next support levels.
On the upside, immediate resistance aligns at 1.1765 (mid-point of the ascending channel), followed by 1.1820 (upper limit of the ascending channel).
(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.
