EUR/USD Forecast: Euro clings to bullish bias after hawkish ECB tone
- EUR/USD trades above 1.1550 in the European session on Friday.
- The technical outlook points to a bullish tilt in the short term.
- The ECB left policy settings unchanged but acknowledged upside risks to inflation.
EUR/USD stays in a consolidation phase above 1.1550 after posting impressive gains on Thursday. Comments from policymakers could impact the pair's action in the near 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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.30% | -1.39% | -0.76% | -0.07% | -1.32% | -1.58% | -0.16% | |
| EUR | 1.30% | -0.07% | 0.48% | 1.24% | -0.02% | -0.29% | 1.14% | |
| GBP | 1.39% | 0.07% | 0.68% | 1.31% | 0.06% | -0.21% | 1.28% | |
| JPY | 0.76% | -0.48% | -0.68% | 0.72% | -0.57% | -0.80% | 0.62% | |
| CAD | 0.07% | -1.24% | -1.31% | -0.72% | -1.30% | -1.51% | -0.09% | |
| AUD | 1.32% | 0.02% | -0.06% | 0.57% | 1.30% | -0.27% | 1.17% | |
| NZD | 1.58% | 0.29% | 0.21% | 0.80% | 1.51% | 0.27% | 1.41% | |
| CHF | 0.16% | -1.14% | -1.28% | -0.62% | 0.09% | -1.17% | -1.41% |
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 Wednesday's sharp decline, EUR/USD reversed its direction on Thursday and gained more than 1% on the day, supported by the European Central Bank's relatively hawkish guidance.
The ECB left policy settings unchanged, as anticipated, after the March meeting. "The war in the Middle East has made outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth," the ECB noted in its policy statement.
In the post-meeting press conference, ECB President Christine Lagarde acknowledged that a prolonged war could increase energy prices for longer and erode incomes. Lagarde further added that risks to inflation are tilted to the upside in the near term and said that they could have a "temporary, targeted and tailored" response to the energy shock.
Early Friday, ECB policymaker Joachim Nagel argued that the ECB would need to raise rates in April if the price outlook sours. On a more neutral note, policymaker José Luis Escrivá said that the situation is highly uncertain and volatile, adding that they must continues to assess a wealth of information before taking a policy step.
The economic calendar will not feature any high-tier data releases on Friday. Hence, investors will continue to pay close attention to comments from policymakers.
In case ECB officials voice their willingness to consider policy-tightening in response to rising inflation, the Euro could preserve its strength.
EUR/USD Technical Analysis:
In the 4-hours chart, EUR/USD trades at 1.1576. The near-term bias is mildly bullish as price holds above the 20-period Simple Moving Average (SMA) at 1.1522 and the 50-period SMA near 1.1528, while remaining below the declining 100- and 200-period SMAs around 1.1600 and 1.1715, respectively. This alignment suggests a recovery phase within a broader downside context, with the recent push away from the lower Bollinger Band toward the mid-band reinforcing improving momentum. The Relative Strength Index (RSI) at 59.7 stays above the 50 line, signaling steady bullish pressure without overbought conditions.
Immediate support is seen at 1.1530 (static level), reinforced by the nearby 20- and 50-period SMA, with a deeper floor at 1.1500 (round level) ahead of 1.1460 (static level) if sellers regain control. On the upside, initial resistance comes at 1.1600 (100-period SMA, upper line of the Bollinger Band) ahead of the horizontal barrier near 1.1670 and the 200-period SMA at 1.1715.
(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.
