EUR/USD Forecast: Euro buyers hesitate on dovish ECB commentary
- EUR/USD trades in negative territory near 1.1350 on Tuesday.
- Dovish comments from ECB policymakers seem to be hurting the Euro.
- The near-term technical outlook highlights a loss of bullish momentum.
EUR/USD stays under bearish pressure in the early European session on Tuesday and trades near 1.1350 after posting small gains on Monday. The pair's technical outlook points to a lack of buyer interest.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.33% | 0.20% | 0.60% | 0.21% | 0.60% | 0.68% | 0.53% | |
| EUR | -0.33% | -0.14% | 0.28% | -0.12% | 0.20% | 0.25% | 0.18% | |
| GBP | -0.20% | 0.14% | 0.43% | 0.01% | 0.31% | 0.38% | 0.28% | |
| JPY | -0.60% | -0.28% | -0.43% | -0.36% | 0.00% | 0.00% | -0.07% | |
| CAD | -0.21% | 0.12% | -0.01% | 0.36% | 0.37% | 0.38% | 0.26% | |
| AUD | -0.60% | -0.20% | -0.31% | -0.00% | -0.37% | -0.03% | -0.14% | |
| NZD | -0.68% | -0.25% | -0.38% | -0.00% | -0.38% | 0.03% | -0.14% | |
| CHF | -0.53% | -0.18% | -0.28% | 0.07% | -0.26% | 0.14% | 0.14% |
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).
Dovish comments from European Central Bank (ECB) policymakers and improving risk mood makes it difficult for EUR/USD to hold its ground.
ECB policymaker Francois Villeroy de Galhau argued on Tuesday that policy normalization in the Eurozone is not complete and ECB Governing Council member Gediminas Šimkus said that the risks that inflation in the Euro area will be below the ECB's target in the future have increased. On the flip side, Minneapolis Federal Reserve (Fed) President Neel Kashkari noted that he supports the stance to maintain interest rates until there is some more clarity on the impact of higher tariffs on inflation, highlighting the policy divergence between the Fed and the ECB.
Meanwhile, US stock index futures rise more than 1% on the day following the Memorial Day holiday. US President Donald Trump's decision to grant an extension to the 50% tariff deadline on the European Union (EU) until July 9 seems to be easing market fears over a deepening conflict between the EU and the US, helping the USD stay resilient against its rivals. Additionally, a spokesperson for the European Commission said on Monday that the EU's 'zero-for-zero' proposal is still on the table in negotiations with the US.
In the second half of the day, the US economic calendar will feature Durable Goods Orders data for April and the Conference Board's Consumer Confidence Index for May. A noticeable improvement in consumer sentiment could provide an additional boost to the USD and trigger another leg lower in EUR/USD.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart declined toward 50 and EUR/USD closed the last 4-hour candle slightly below the 20-period Simple Moving Average (SMA), reflecting a loss of bullish momentum.
On the downside, the 200-period SMA aligns as immediate support at 1.1315 before 1.1270 (Fibonacci 38.2% retracement of the latest uptrend, 20-day SMA, 100-period SMA) and 1.1180 (Fibonacci 50% retracement).
Looking north, resistance levels could be spotted at 1.1380 (Fibonacci 23.6% retracement), 1.1430 (static level) and 1.1500 (static level, round level).
Euro FAQs
The Euro is the currency for the 19 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.
