EUR/USD Forecast: Euro buyers remain hesitant
- EUR/USD trades near 1.0800 after posting small losses on Monday.
- Investors refrain from taking large positions ahead of US tariff announcements.
- The US economic calendar will feature JOLTS Job Openings and ISM Manufacturing PMI data.
After rising to a fresh weekly high near 1.0850 on Monday, EUR/USD lost its traction and closed the day marginally lower. The pair struggles to hold its ground and trades near 1.0800 in the European session on Tuesday as markets remain risk-averse ahead of Wednesday's tariff announcements from the US.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.24% | 0.22% | -0.15% | 0.64% | 0.60% | 0.79% | 0.36% | |
| EUR | -0.24% | 0.07% | -0.37% | 0.43% | 0.44% | 0.58% | 0.16% | |
| GBP | -0.22% | -0.07% | -0.44% | 0.40% | 0.36% | 0.53% | 0.12% | |
| JPY | 0.15% | 0.37% | 0.44% | 0.79% | 0.80% | 0.98% | 0.43% | |
| CAD | -0.64% | -0.43% | -0.40% | -0.79% | 0.00% | 0.15% | -0.27% | |
| AUD | -0.60% | -0.44% | -0.36% | -0.80% | -0.00% | 0.15% | -0.27% | |
| NZD | -0.79% | -0.58% | -0.53% | -0.98% | -0.15% | -0.15% | -0.43% | |
| CHF | -0.36% | -0.16% | -0.12% | -0.43% | 0.27% | 0.27% | 0.43% |
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).
Following a bearish opening, Wall Street's main indexes recovered sharply on Monday, limiting the US Dollar's (USD) gains and helping EUR/USD find support. Early Tuesday, however, US stock index futures trade in negative territory.
In the second half of the day, February JOLTS Job Openings and March ISM Manufacturing Purchasing Managers Index (PMI) data will be featured in the US economic docket.
Federal Reserve (Fed) Bank of Richmond President Thomas Barkin said on Monday that he is nervous about inflation and employment. Hence, a significant decline in the job openings could hurt the USD with the immediate reaction. Meanwhile, the ISM Manufacturing PMI is expected to drop into the contraction territory below 50. In case this data comes in above 50, it could support the USD.
Nevertheless, the market reaction is likely to remain short-lived, with investors refraining from taking large positions before seeing the details of the US tariff decisions and assessing their potential impact on the economic outlook.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart retreated below 50 and EUR/USD closed below the 20-day Simple Moving Average (SMA) after testing this level on Monday, reflecting buyers' hesitancy.
In case 1.0800 (round level, static level) fails, technical sellers could take action and open the door for an extended slide toward 1.0730 (200-day SMA). On the upside, 1.0840 (20-day SMA) aligns as first resistance before 1.0900 (static level, round level) and 1.0950 (static 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.
