EUR/USD Forecast: Euro could stretch higher if mood remains upbeat
- EUR/USD holds steady at around 1.1550 in the European morning on Monday.
- The technical outlook hints at a bullish tilt in the near term.
- Markets grow optimistic about the US government shutdown ending soon.
EUR/USD closed in positive territory for three consecutive days and registered moderate gains in the previous week. The pair trades in a narrow range at around 1.1550 in the European morning on Monday as investors remain focused on the political developments in the US.
Euro Price Last 7 Days
The table below shows the percentage change of Euro (EUR) against listed major currencies last 7 days. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.21% | -0.11% | 0.05% | 0.06% | 0.29% | 1.69% | 0.22% | |
| EUR | 0.21% | 0.10% | 0.36% | 0.27% | 0.49% | 1.89% | 0.43% | |
| GBP | 0.11% | -0.10% | 0.08% | 0.17% | 0.39% | 1.79% | 0.33% | |
| JPY | -0.05% | -0.36% | -0.08% | -0.01% | 0.23% | 1.62% | 0.30% | |
| CAD | -0.06% | -0.27% | -0.17% | 0.00% | 0.16% | 1.59% | 0.16% | |
| AUD | -0.29% | -0.49% | -0.39% | -0.23% | -0.16% | 1.40% | -0.06% | |
| NZD | -1.69% | -1.89% | -1.79% | -1.62% | -1.59% | -1.40% | -1.44% | |
| CHF | -0.22% | -0.43% | -0.33% | -0.30% | -0.16% | 0.06% | 1.44% |
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).
A group of centrist Democrats negotiated a deal with Republicans over the weekend and the US Senate has voted 60-40 on a temporary funding bill to reopen the government. The approved package will need to be passed by the House of Representatives before it's sent to US President Donald Trump to be signed. This development seems to be helping the market mood improve in the beginning of the week. At the time of press, US stock index futures were up between 0.2% and 1.25%.
In the absence of high-impact data releases, a bullish opening in Wall Street, followed by a risk rally, could make it difficult for the US Dollar (USD) to find demand and open the door for a leg higher in EUR/USD.
Meanwhile, European Central Bank (ECB) Vice President Luis de Guindos said that they firmly believe that interest rates are at the appropriate level. "If inflation developments deviate, or if projections are modified, and if transmission is not correct, then we may change," he added. Nevertheless, these comments failed to trigger a noticeable market reaction.
EUR/USD Technical Analysis
EUR/USD holds above the 20-period and the 50-period Simple Moving Averages (SMAs) on the 4-hour chart, while the Relative Strength Index (RSI) edges higher toward 60, reflecting a lack of seller interest.
On the upside, 1.1570 (Fibonacci 23.6% retracement of the latest downtrend) aligns as the first resistance level before 1.1590 (100-period SMA) and 1.1630 (200-period SMA, Fibonacci 38.2% retracement).
Looking south, support levels could be spotted at 1.1540-1.1530 (50-period SMA, 20-period SMA), 1.1500 (static level) and 1.1450 (end-point of the downtrend).
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.
(This story was corrected on November 10 at 08:34 GMT to note that EUR/USD trades around 1.1550 in the European morning on Monday, not Friday.)
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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.
