EUR/USD Forecast: Euro could extend uptrend once it stabilizes above 1.0500
- EUR/USD started the new week on a bullish note and rose above 1.0500.
- The CDU/CSU, led by Friedrich Merz, won the German election.
- Improving risk mood could help EUR/USD push higher.
EUR/USD edged lower on Friday and closed the previous week marginally lower. The pair opened on a bullish note and climbed above 1.0500 early Monday as investors reacted to the outcome of the German election outcome. Although the pair inches lower in the European morning, the technical outlook and the improving risk sentiment suggests that it could post additional gains in the near term.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.28% | -0.11% | 0.18% | -0.21% | -0.24% | -0.18% | -0.13% | |
| EUR | 0.28% | 0.08% | 0.30% | -0.11% | 0.03% | -0.09% | -0.01% | |
| GBP | 0.11% | -0.08% | 0.26% | -0.19% | -0.05% | -0.16% | -0.10% | |
| JPY | -0.18% | -0.30% | -0.26% | -0.40% | -0.35% | -0.29% | -0.22% | |
| CAD | 0.21% | 0.11% | 0.19% | 0.40% | -0.09% | 0.03% | 0.09% | |
| AUD | 0.24% | -0.03% | 0.05% | 0.35% | 0.09% | -0.12% | -0.05% | |
| NZD | 0.18% | 0.09% | 0.16% | 0.29% | -0.03% | 0.12% | 0.08% | |
| CHF | 0.13% | 0.01% | 0.10% | 0.22% | -0.09% | 0.05% | -0.08% |
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 CDU/CSU, led by Friedrich Merz, won the German election by securing about 28.6% of total votes, while the far-right AfD came second with 20.8%. Finally, Olaf Scholz's SPD received 16.4% of votes to drop to third. The Euro gathered strength as these results offered no major surprises. Experts now expect a two-party coalition to be formed with CDU/CSU and SPD.
In the second half of the day, the US economic calendar will not feature any high-impact data releases that could influence the US Dollar's (USD) valuation in a noticeable way.
Meanwhile, US stock index futures were last seen rising between 0.3% and 0.45%. A bullish opening in Wall Street could make it difficult for the USD to stage a rebound and support EUR/USD.
On Tuesday, the Conference Board will release the US Consumer Confidence Index data for February.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds above 50, suggesting that the bullish bias remains intact.
EUR/USD faces the first resistance area at 1.0500-1.0510 (round level, Fibonacci 78.6% retracement of the latest downtrend). Once the pair flips that area into support, 1.0550 (static level) could be seen as the next resistance level before 1.0600 (beginning point of the downtrend).
Looking south, supports could be spotted at 1.0440 (Fibonacci 61.8% retracement), 1.0390-1.0400 (100-period Simple Moving Average (SMA), 50-day SMA, Fibonacci 50% retracement of the latest downtrend) and 1.0375 (200-period SMA).
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.
