EUR/USD Forecast: Euro could extend rebound once 1.1700 is confirmed as support
- EUR/USD stabilizes near 1.1700 after posting gains on Monday.
- The US Dollar could struggle to find demand in case Trump-Powell feud escalates further.
- The technical outlook points to a bullish tilt in the near term.
EUR/USD started the week on a firm footing and registered strong gains on Monday. The pair moves up and down in a tight channel at around 1.1700 in the European on Tuesday but the technical outlook points to a bullish shift 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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.59% | -0.55% | -0.35% | -0.27% | 0.03% | 0.38% | -0.52% | |
| EUR | 0.59% | 0.12% | 0.24% | 0.30% | 0.58% | 0.80% | 0.03% | |
| GBP | 0.55% | -0.12% | -0.08% | 0.23% | 0.50% | 0.90% | 0.11% | |
| JPY | 0.35% | -0.24% | 0.08% | 0.09% | 0.43% | 0.69% | 0.00% | |
| CAD | 0.27% | -0.30% | -0.23% | -0.09% | 0.37% | 0.66% | -0.30% | |
| AUD | -0.03% | -0.58% | -0.50% | -0.43% | -0.37% | 0.29% | -0.41% | |
| NZD | -0.38% | -0.80% | -0.90% | -0.69% | -0.66% | -0.29% | -0.79% | |
| CHF | 0.52% | -0.03% | -0.11% | -0.00% | 0.30% | 0.41% | 0.79% |
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 US Dollar (USD) came under selling pressure as markets reacted to fresh developments surrounding the conflict between United States (US) President Donald Trump's administration and Federal Reserve (Fed) Chairman Jerome Powell.
Fox News reported late Monday that Representative Anna Paulina Luna sent a letter to the Department of Justice (DoJ), referring Fed Chairman Jerome Powell for criminal charges, accusing him of perjury on two occasions. Meanwhile, US Treasury Secretary Scott Bessent told CNBC in an interview that they need to review the entire Fed institution and its performance, criticizing the Fed's "fear-mongering over tariffs" despite a lack of significant signs of inflation.
Early Tuesday, the European Central Bank noted in its Bank Lending Survey that the trade was a drag on demand but did not result in tightening in credit standards. This headline failed to trigger a noticeable market reaction.
The economic calendar will not offer any high-impact macroeconomic data releases that could impact EUR/USD's performance in a significant way on Tuesday. In case the Trump administration's aggression against the Fed continues, the USD could struggle to find demand and open the door for a leg higher in EUR/USD. On the other hand, the USD could rebound and cause the pair to correct lower if market participants' fears over the Fed losing its independence ease.
EUR/USD Technical Analysis
The 100-period Simple Moving Average (SMA) aligns as a pivot level at 1.1700. In case EUR/USD rises above this level and confirms it as support, technical buyers could remain interested. In this scenario, 1.1760 (static level) could be seen as the next resistance level before 1.1800 (static level, round level).
If EUR/USD fails to reclaim 1.1700, support levels could be seen at 1.1650 (Fibonacci 23.6% retracement of the latest uptrend), 1.1620 (200-period SMA) and 1.1540 (Fibonacci 38.2% retracement).
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.
