EUR/USD Forecast: Euro closes in on key support levels
- EUR/USD struggles to gain traction, trades near 1.1450.
- The technical outlook points to a bearish tilt in the near term.
- Financial markets in the US will remain closed on Thursday.
EUR/USD stays on the back foot early Thursday and trades modestly lower on the day at around 1.1450. The near-term technical outlook hints at a buildup of bearish momentum.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.64% | 1.13% | 0.55% | 0.95% | 0.21% | 0.68% | 0.90% | |
| EUR | -0.64% | 0.37% | -0.12% | 0.32% | -0.32% | 0.04% | 0.25% | |
| GBP | -1.13% | -0.37% | -0.45% | -0.05% | -0.68% | -0.32% | -0.11% | |
| JPY | -0.55% | 0.12% | 0.45% | 0.39% | -0.65% | -0.23% | -0.07% | |
| CAD | -0.95% | -0.32% | 0.05% | -0.39% | -0.65% | -0.27% | -0.05% | |
| AUD | -0.21% | 0.32% | 0.68% | 0.65% | 0.65% | 0.36% | 0.61% | |
| NZD | -0.68% | -0.04% | 0.32% | 0.23% | 0.27% | -0.36% | 0.21% | |
| CHF | -0.90% | -0.25% | 0.11% | 0.07% | 0.05% | -0.61% | -0.21% |
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).
The Federal Reserve (Fed) left the policy rate unchanged at the range of 4.25%-4.5% after the June meeting, as expected. The revised Summary of Economic Projections (SEP) showed that policymakers still see a 50 basis points (bps) reduction in the policy rate in 2025 but now forecast only a 25 bps cut in 2026, against the 50 bps projected in March's SEP.
In the post-meeting press conference, Fed Chairman Jerome Powell reiterated they are well-positioned to wait and assess the impact of tariffs on inflation and inflation expectations before deciding on the next policy step. The US Dollar (USD) holds its ground in the Fed aftermath and makes it difficult for EUR/USD to stage a rebound.
Meanwhile, growing concerns over a deepening conflict in the Middle East, with the direct involvement of the United States (US), cause markets to adopt a cautious stance. Bloomberg reported early Thursday that US officials are preparing for a possible strike on Iran in coming days. Moreover, the Wall Street Journal claimed that US President Donald Trump has approved attack plans on Iran earlier this week but wanted to wait to see if Tehran would abandon its nuclear program.
Financial markets in the US will remain closed in observance of the Juneteenth holiday. Thin trading conditions and heightened geopolitical tensions could cause investors to refrain from betting on a Euro recovery.
EUR/USD Technical Analysis
EUR/USD trades near the lower limit of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly below 40, reflecting a bearish tilt in the short-term outlook.
On the downside, the 100-period Simple Moving Average (SMA) aligns as the immediate support level at 1.1440 before 1.1400 (Fibonacci 38.2% retracement of the latest uptrend) and 1.1350 (200-period SMA, Fibonacci 50% retracement).
Looking north, 1.1490-1.1500 (Fibonacci 23.6% retracement, 50-period SMA) could be seen as the first resistance area ahead of 1.1560 (mid-point of the ascending channel) and 1.1600 (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.
