EUR/USD Forecast: Euro looks to extend rebound as risk flows return
- EUR/USD gained traction and rose toward 1.0600 in the European session.
- The pair's near-term technical outlook points to a build-up of bullish momentum.
- Improving risk mood hurts the USD as focus shifts to central bank speak.
Following the bearish start to the week, EUR/USD staged a rebound and closed virtually unchanged on Monday. With risk flows returning to markets early Tuesday, the pair extended its recovery toward 1.0600.
After a three-day weekend, US Treasury bond yields opened sharply lower and made it difficult for the US Dollar (USD) to find demand. Dovish comments from Federal Reserve (Fed) officials also put additional weight on the USD.
"If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the fed funds rate," Dallas Fed President Lorie Logan said on Monday. On the same note, Fed Vice Chair Philip N. Jefferson stated that he will take into account the recent rise in bond yields when evaluating the future direction of monetary policy.
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 | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.18% | -0.13% | 0.00% | -0.01% | 0.33% | 0.15% | -0.04% | |
| EUR | 0.18% | 0.04% | 0.21% | 0.19% | 0.49% | 0.31% | 0.14% | |
| GBP | 0.12% | -0.04% | 0.17% | 0.16% | 0.44% | 0.28% | 0.10% | |
| CAD | -0.01% | -0.21% | -0.17% | -0.02% | 0.29% | 0.10% | -0.07% | |
| AUD | 0.01% | -0.21% | -0.17% | 0.01% | 0.32% | 0.14% | -0.06% | |
| JPY | -0.31% | -0.52% | -0.46% | -0.27% | -0.34% | -0.18% | -0.36% | |
| NZD | -0.13% | -0.35% | -0.28% | -0.12% | -0.13% | 0.17% | -0.22% | |
| CHF | 0.04% | -0.14% | -0.09% | 0.05% | 0.05% | 0.37% | 0.17% |
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).
In the second half of the day, Fed Governor Christopher Waller and Minneapolis Fed President Neel Kashkari will be delivering speeches. In case markets continue to price in a no change in the Fed's policy rate for the rest of the year, the USD could stay under selling pressure and help EUR/USD stretch higher. According to the CME Group FedWatch Tool, markets still see a 30% probability of the Fed raising the policy rate by another 25 basis points before the end of the year, suggesting that the USD has more room on the downside.
European Central Bank (ECB) President Christine Lagarde will also speak at the International Monetary Fund (IMF) annual meeting.
Meanwhile, investors will continue to pay close attention to developments surrounding the Israel-Hamas conflict. A further escalation of geopolitical tensions could bring back safe-haven flows and make it difficult for EUR/USD to hold its ground.
EUR/USD Technical Analysis
EUR/USD climbed above the 1.0570-1.0580 area, where the Fibonacci 23.6% retracement level of the latest downtrend and the 100-period Simple Moving Average (SMA) on the 4-hour chart are located. Moreover, the Relative Strength Index (RSI) indicator climbed above 60, highlighting the bullish tilt in the short-term outlook.
On the upside, 1.0640 (Fibonacci 38.2% retracement) aligns as next resistance before 1.0670 (200-period SMA) and 1.0700 (psychological level, Fibonacci 50% retracement).
If EUR/USD retreats below 1.0570 and starts using that level as resistance, sellers could take action. In that scenario, 1.0535 (50-period SMA) and 1.0500 (psychological level, static level) could be seen as next bearish targets.
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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.
