EUR/USD Forecast: Euro gains could remain limited in near term
- EUR/USD trades at fresh multi-month highs near 1.0900 early Tuesday.
- The pair could have a difficult time gathering bullish momentum in the near term.
- The US economic calendar will feature mid-tier data releases.
EUR/USD gains traction and trades at its highest level since early November near 1.0900 in the European morning on Tuesday. The pair's overbought conditions and the risk-averse market atmosphere could cause buyers to refrain from betting on another steady leg higher in the near term.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -3.86% | -1.78% | -1.54% | -0.65% | -1.10% | -1.58% | -1.85% | |
| EUR | 3.86% | 2.15% | 2.42% | 3.34% | 2.87% | 2.37% | 2.07% | |
| GBP | 1.78% | -2.15% | 0.27% | 1.15% | 0.69% | 0.22% | -0.08% | |
| JPY | 1.54% | -2.42% | -0.27% | 0.90% | 0.44% | -0.05% | -0.32% | |
| CAD | 0.65% | -3.34% | -1.15% | -0.90% | -0.46% | -0.93% | -1.22% | |
| AUD | 1.10% | -2.87% | -0.69% | -0.44% | 0.46% | -0.48% | -0.78% | |
| NZD | 1.58% | -2.37% | -0.22% | 0.05% | 0.93% | 0.48% | -0.28% | |
| CHF | 1.85% | -2.07% | 0.08% | 0.32% | 1.22% | 0.78% | 0.28% |
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).
Major equity indexes in the US started the week under immense bearish pressure amid growing fears over the US economy tipping into recession.
When asked whether his policies could weigh on the economic activity in an interview over the weekend, US President Donald Trump acknowledged that there will be a "period of transition." On Monday, the Nasdaq Composite fell 3.8%, the S&P 500 lost 2.7% and the Dow Jones Industrial Average declined more than 2%. Reflecting the intense flight to safety, the CBOE Volatility Index (VIX), also known as Wall Street's fear gauge, rose about 20% on the day.
The US economic calendar will feature NFIB Business Optimism Index for February and JOLTS Job Openings data for January. A significant decline in the business sentiment data could weigh on the US Dollar (USD) with the immediate reaction. On Wednesday, the US Bureau of Labor Statistics will publish the Consumer Price Index (CPI) data for February, which could trigger the next big action in EUR/USD.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rose above 70, suggesting that EUR/USD turned technically overbought, once again, after a short-lasting correction. In case the pair holds above 1.0900 (static level, round level) and confirms this level as support, 1.0940 (static level) could be seen as next resistance before 1.1000 (psychological level, static level).
On the downside, 1.0840 (20-period Simple Moving Average (SMA)) aligns as interim support before 1.0800 (static level, round level) and 1.0730 (200-day 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.
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.
