EUR/USD Forecast: Euro could stretch higher on improving risk sentiment
- EUR/USD fluctuates in a tight channel at around 1.0650.
- Near-term technical outlook doesn't point to a buildup of directional momentum.
- A bullish opening in Wall Street could limit the USD's gains.
EUR/USD moves sideways at around 1.0650 to begin the new week. The pair's near-term technical outlook shows a lack of directional momentum. In the absence of high-tier data releases, the risk sentiment could impact the US Dollar's (USD) valuation and drive the pair's action.
Following a sharp decline in the early trading hours of the Asian session on Friday, EUR/USD managed to stage a rebound. Easing fears over a deepening conflict in the Middle East made it difficult for the USD to preserve its strength heading into the weekend.
Euro price in the last 7 days
The table below shows the percentage change of Euro (EUR) against listed major currencies in the last 7 days. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.06% | 0.78% | -0.21% | 0.69% | 0.90% | 0.63% | -0.35% | |
| EUR | 0.06% | 0.83% | -0.13% | 0.76% | 0.96% | 0.70% | -0.29% | |
| GBP | -0.79% | -0.85% | -0.98% | -0.08% | 0.12% | -0.14% | -1.14% | |
| CAD | 0.20% | 0.13% | 0.96% | 0.89% | 1.09% | 0.83% | -0.16% | |
| AUD | -0.70% | -0.77% | 0.07% | -0.90% | 0.20% | -0.06% | -1.06% | |
| JPY | -0.89% | -0.96% | -0.10% | -1.11% | -0.21% | -0.25% | -1.27% | |
| NZD | -0.64% | -0.71% | 0.12% | -0.84% | 0.06% | 0.26% | -1.00% | |
| CHF | 0.35% | 0.28% | 1.13% | 0.15% | 1.04% | 1.24% | 0.98% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Early Monday, US stock index futures are up between 0.3% and 0.5%, reflecting an improving risk mood. In case Wall Street opens in positive territory and continue to push higher, the USD could come under bearish pressure and help EUR/USD push higher.
European Commission will release preliminary Consumer Confidence data for April later in the day and European Central Bank (ECB) President Christine Lagarde will deliver a speech during the American trading hours.
On Tuesday, Manufacturing and Services PMI data from Germany, the Euro area and the US will be watched closely by market participants.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart moves sideways near 50 and EUR/USD stays in between the 20-period and the 50-period Simple Moving Averages (SMA), highlighting the pair's indecisiveness.
On the upside, 1.0700 (static level) aligns as first resistance before 1.0730-1.0740 (static level, 100-period SMA) and 1.0800 (psychological level, static level). Supports are located at 1.0600 (psychological level, static level) and 1.0530 (static level from November).
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.
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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.
